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TMI Blog2017 (7) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... 44C of the Act there is no provision of issuing notice of demand. The notice of demand u/s 156 of the Act is required to be issued only with the final order passed in pursuance of the direction of ld Dispute Resolution Panel, which is not demined by the assessee. Therefore, according to us the tribunal is not right appellate forum where assessee should have filed such an appeal where the order is passed u/s 144 read with section 144C of the Act. Hence, according to us the appeal of the assessee is not maintainable. Disallowance under section 40(a)(i) - commission paid to advertisement agency without deducting TDS - Held that:- DAn advertiser engages an advertising agency and the advertising agency in turn approaches print and electronic media for publication/broadcast of the advertisement. There is no direct link between the print and electronic media and the advertiser. In the normal course when orders are released by the advertising agencies, the name of the client is always disclosed on it, though there is no principal agent relationship between the print and electronic media on one hand and the advertising agencies on the other hand. As per the rules of INS, accreditation is aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion thereof making out a case that the same shall enable it to pass orders or for any substantial cause and if the Tribunal is satisfied that the additional evidence so produced is required to enable it to pass orders or for any other substantial cause, it can allow the parties including the revenue to produce such additional evidence exercising its discretion in terms of the said Rule. Unexplained money added u/s 69A - amount representing share capital raised by NDTV Networks International Holdings BV, a subsidiary of the appellant company - Held that:- he assessee has submitted scanty details and also tried to hide certain facts by not denying or owning the emails exchanged. Further it is too naive to accept in the facts and circumstances of the case that any transaction carried out through banking channel should be believed as genuine. In fact the money mostly rout through banking channels only and for these transactions only various sections in the income tax act are incorporated dehors the banking transitions such as section 69, 68 etc. It is only the banking transactions through which the tax evaders bring their unaccounted money in to the books by creating or dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice. The assessee is also directed to submit the complete explanation with respect to the above loan with exhaustive evidences before the ld Assessing Officer. Needless to say that ld Assessing Officer after enquiry as deem fit confront the assessee with the result of the enquiry and after seeking the explanation of the assessee deal with the issue in accordance with the law Jurisdiction of DRP directing the ld Assessing Officer to enhance the variation as a result of further enquiry in respect of loan transaction between NDTV Network PLC UK and NDTV Networks BV - Held that:- According to the provision of section 144C(a) the Dispute Resolution Panel has power for enhancement to the variation proposed and further explanation added therein by the Finance Act 2012 with retrospective effect from 01.04.2009 also provides that the ld DRP has power to enhance the variation on any matter arising out of assessment proceedings relating to the draft order. Notwithstanding that such matter was raised or not by the eligible assessee. In view of this we dismiss ground No. 10 of the cross objection. Addition u/s 14A - Held that:- In view of the above of the ld Assessing Officer that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee against the order of Assistant Commissioner of Income Tax, Circle-13(1), New Delhi (hereinafter referred to as the ld AO) passed u/s 144 read with section 144C(13) of the Income Tax Act, 1961 in pursuance of the direction issued by the ld Dispute Resolution Panel [hereinafter referred to as the Ld DRP] u/s 144C(5) of the Act dated 31.12.2013 against the draft assessment order of the ld Assessing Officer wherein, transfer pricing adjustments proposed in terms of order of Additional Director of Income Tax, Transfer Pricing Officer-II(1), New Delhi (hereinafter referred to as 'Transfer Pricing Officer', 'TPO') passed u/s 92CA(3) of the Income Tax Act on 30.01.2013 and other corporate additions proposed were also incorporated therein. 2. The assessee is a company engaged in the business of television news broadcasting through its three different channels. It is also producing customized software, programmes for broadcasters. It filed its return of income on 30.09.2009 declaring loss of ₹ 64,83,91,422/-. Subsequently, the return was picked up for the scrutiny and notice u/s 143(2) was issued on 19.08.2010. During the course of assessment proceedings reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to those enquiries an addition of ₹ 254,75,00,000/- was made on account of unexplained unsecured loan u/s 68 on account of failure on part of the assessee to discharge its onus of proving the genuineness of the transaction of raising unsecured loan through its subsidiaries NDTV Networks PLC . All other adjustments/ variations proposed by the ld AO were directed to be retained in final assessment order. 7. Consequently, the ld Assessing Officer passed order u/s 144 read with section 144C(13) of the Income Tax Act on 21.02.2014 determining the total income of the assessee at ₹ 838,33,37,197/- against the returned loss of the assessee of ₹ 64,83,91,422/- making following additions and disallowances:- Sl No. Particulars Amount 1 Disallowance u/s 14A Rs.78,40,990/- 2 Transfer pricing adjustments u/s 92CA(3) ₹ 5,09,65,629/- 3 Unexplained money u/s 69A ₹ 642,54,22,000/- 4 Unexplained unsecured loans u/s 68 ₹ 254,75,00,000/- 8. Therefore, assessee aggrieved with the order passed by the Assessing Officer u/s 144 of the Income Tax Act has preferred appeal before us in ITA No. 1212/Del/2014. 9. The Revenue aggrieved with the direction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 233/Del/2014 wherein, initially it has raised five cross objection as under:- "1. That on the facts and circumstances of the case, the cross appeal bearing ITA No. 2658/DEL/2O18 filed by the Ld. Assessing Officer ["AO"] is barred by limitation, therefore could not be entertained and liable to be dismissed. 2. That on the facts and circumstances of the case and in law, the Ld. Assessing Officer ["AO"] erred in agitating in Ground No. i of the captioned appeal that the HonTDle Dispute Resolution Panel - II ["DRP"] erred in not approving disallowance under section 40(a)(ia) of the Act amounting to ₹ 41,54,41,111 being an alleged commission. 2.1 That the Ld. AO erred in stating that the decision of Hon'ble Delhi High Court in the case of Living Media India Ltd. in ITA 1264 No. 1264 of 2007 is pending before Hon'ble Supreme Court in SLP (Civil) 1257 of 2009 whereas in fact the Hon'ble Supreme Court had dismissed the said SLP vide its order dated 11/12/2009. 2.2 Without prejudice to above cross objections and in the alternate, the Ld. AO erred in not appreciating that alleged constructive payments could not be disallowed under section 4o(a)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to exclude the reversal of ESOP expenditure offered to tax amounting of ₹ 83,31,150/- in the computation of income in the year under consideration." 12. Subsequently vide letter dated 11.05.2016 the assessee modified its cross objection as under:" Cross objection No. 5:- That in views of the decision of the Hon'ble Tribunal dated December 20,2013 in appellant's own case on the allowability of ESOP expenditure for AY 200607, the ld AO ought to have allowed the ESOP expenditure of ₹ 33835748/- in the year under consideration in accordance with the aforesaid decision as against ₹ 125271933/- claim in AY 2006-07, ₹ 212841993/- claimed in AY 2007-08 and ₹ 178656690/- claimed in AY 2008-09 and further ought to have excluded the reversal of ESOP expenditure offered to tax amounting to ₹ 8331150/- in the computation of income in the year under consideration." 13. The assessee further made a prayer for raising the additional cross objections for the reason that revenue in its cross objection has raised an objection that the appeal of the assessee is not maintainable on the ground that the assessment has been framed by the Assessing Officer u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. AO that the Appellant had not complied with the provisions of section 212 of Companies Act, as the prescribed documents were not attached with the audited accounts is highly arbitrary and not in accordance with the provisions of the Act and has been recorded by brushing aside the order of the Ministry of Corporate Affairs, which has exempted the assessee to attach the details of the subsidiary companies with its balance sheet. 1.3 That the Ld. AO/Ld. DRP erred in applying the provisions of section 69A of the Act by failing to appreciate that the transaction in question does not pertain to the Appellant and the Appellant is not a party to the said transaction. Cross objection No. 9:- That the Ld. AO/Ld. DRP has grossly erred in law and on facts of the instant case in making an addition of ₹ 2,54,75,00,000/- (as sum equivalent to $50 Million) by invoking provisions of section 68 of the Act purely on extraneous or irrelevant consideration and in failing to appreciate that there was no credits in the books of Appellant and as such section 68 of the Act had no application. 9.1 That the Ld. AO/Ld DRP grossly erred in not appreciating that the borrower of the loan namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. TPO erred in inadvertently considering the amount of price received for the impugned international transaction (BSS) as ₹ 7,46,87,177 instead of ₹ 7,52,77,881 while computing the adjustment thereby, resulting in incorrect computation of the adjustment. Cross objection No. 14:- That the Ld. AO/Ld. TPO has grossly erred in making an addition of ₹ 4,35,02,400/- in respect of the alleged international transaction of provision of Corporate Guarantee on the ground that the Appellant should have been compensated for providing such alleged guarantee. 14.1 That the Ld. AO/Ld. TPO failed to appreciate that the Appellant did not provide any corporate guarantee during the year but merely gave an undertaking to provide guarantee for and on behalf of its AE and had not actually provided any guarantee. 14.2 That the Ld. AO/Ld. TPO erred in computing the arm's length guarantee commission rate erroneously based on flawed methodology and adjustments (without prejudice to the Appellant's contention that it had not provided any guarantee). Cross objection No. 15:- That on the facts of the case and in law, the Ld. AO has erred in levying interest under 234B/D of the Act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer which is placed at page no. 355 of the appeal set wherein, in heading at Sl No. 11 it is mentioned that impugned draft order dated 31.03.2013 is passed u/s 143(3) read with section 144C of the Act. He further referred to the heading of the order which also says that draft assessment order is passed u/s 143(3) read with section 144C of the Act. He referred to the final assessment order placed at page No. 63 of the appeal set to say that ld Assessing Officer has without any reason mentioned section 144 in the heading of the order. He therefore submitted that for all intent and purposes the assessment order passed by the ld Assessing Officer is u/s 143(3) of the act and not u/s 144 of the act as claimed by the revenue. 16. With respect to the claim of the Revenue that order has been passed by the ld Assessing Officer u/s 144 of the Income Tax Act he referred to page No. 400 of the appeal set and referred page No. 46 of 51 of the draft assessment order. His contention was that as the material information according to the ld Assessing Officer pertaining to the subsidiaries companies of the assessee was not furnished pursuant to summons issued in December 2010 and notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee are not incomplete. In the end, he submitted a note stating that accounts of the assessee are complete and proper. Contents of his note are as under:- "1. The captioned appeals and cross objection pertaining to AY 2009-10 are fixed for hearing on 03.07.2017 having been adjourned from 01.05.2017. 2. That on 20.03.2017, the Honble Tribunal was pleased to hear the cross objection filed by the revenue i.e. CO No. 373/Del/2014 in ITA No. 1212/Del/2014. The said cross objection of the revenue have been disposed off by an order dated 23.02.2017. In the cross objection filed by the revenue, it had been contended that the appeal filed by the assessee is not maintainable, since assessment had been framed u/s 144 of the Act and in the absence of any provision providing for an appeal before the Honble Tribunal, the appeal filed by the assessee is not maintainable. However, the Honble Tribunal has disposed off the said cross objection when it had held that the cross objection filed is not maintainable. 3. It is further submitted that the 'subject matter' of appeal in assessee's appeal (ITA No. 1212/Del/2014) is as per grounds of appeal and for the sake of brevity are not being extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the subject matter of appeal. It is undeniable fact that the Honble Tribunal has entertained the appeal when it has granted the stay u/s 254(2A) of the Act and revenue has not filed any writ challenging the order on the ground that the appeal is not maintainable before the Honble Tribunal. In brief the submission is that: a. That no appeal would lie before the Honble Tribunal is a non issue; b. It is a fait accompli i.e. appeal filed by the appeal is not maintainable; c. The assessment has not been framed u/s 144 o the Act as has been contended by the revenue instead an assessment framed u/s 143(3) of the Act. Without prejudice to the aforesaid, and to support that the contention of the revenue that assessment was framed u/s 144 of the Act is misconceived, it is submitted as under: (a) The draft order of assessment dated 31.03.2013 was admittedly made u/s 143(3) read with section 144C of the IT Act as is specifically stated by the learned AO in the order and thus it is an admitted fact that the draft order of assessment was not made u/s 144 of the Act. In fact, there is no concept of framing the draft order of assessment u/s 144 of the Act. (b) There is no finding or dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons have been raised which are without prejudice to its submission that the revenue's contention that assessment has been framed u/s 144 is completely misconceived both factually and legally. 8. It is submitted that neither the draft order of assessment reflect that the draft order was framed u/s 144 of the Act nor it is submitted with respect that there is a direction by the learned DRP to frame assessment u/s 144 of the Income Tax Act. It is added here that had, the draft assessment been made u/s 144 of the Act then it is obvious, as provided u/s 246A of the Act, the only remedy available was to file an appeal before the learned CIT(A) and not to have filed objection before the learned DRP u/s 144C(5) of the Act. In fact it appears the learned AO on the strength of the observation made by him in the draft order dated 31.03.2013 (see pages 48 - 49) is contending that the draft of the order of assessment was made u/s 144 of the Act. The finding recorded are as below: "In view of the same as stated hereinabove, the undersigned holds and declares that the provisions of section 145(3) of the IT Act, 1961 is applicable to the case of the assessee for the assessment year 2009-10 in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and applicable to the relevant assessment year. 11. In the instant case it is submitted that the assessee had neither failed to make return nor it had failed to comply with all the terms of the notice issued u/s 142(1) of the Act or having made the return, failed to comply with all the terms of section 143(2) of the Act. There are no other circumstances which permit the learned AO to frame assessment u/s 144 of the Act. In the instant case, none of the aforesaid circumstances exists or can be shown to have existed. Thus it is submitted the mere fact that the learned AO intended to compute income u/s 145(3) does not made an order of assessment to be an order u/s 144 of the Act. Section 145(3) reads as under: -Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in subsection (1),[or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee], the Assessing Officer may make an assessment in the manner provided in section 144." 12. It is further submitted that when the direction of the learned DRP dated 31.12.2013, is perused it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Officer; were it otherwise, one would be left with an infinite progression of returns scrutinised, found false, returns altered, found false and so on. Where the assessee has made a false return and has been given notice to satisfy the Income-tax Officer as to the correctness of the return and produce his books which are scrutinised and found false or incomplete or unreliable, then the proviso to Section 13 comes into play. In this case the Income-tax Officer has been given a return which is not reliable. That return has been supported by books which are also not reliable. The position is in substance the same as arises when no return has been made at all, but in law there is a curious difference between the two positions. If no return has been made at all or if a return has been made and the notice given has not been complied with, then Section 23(4) applies and the Income-tax Officer has to make the assessment to the best of his judgment. The Privy Council in the case mentioned above has decided that where Section 23(4) applies so long as the Income-tax Officer does not act dishonestly, vindictively or capiciously but exercises his judgment, he may make such assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now to turn around to show that assessment was made u/s 144 of the Act is misleading contention. 15. Lastly it is submitted that Gujarat High Court has held in CIT vs. Purshottamdas T. Patel reported in 209 ITR 52, that the assessment is one integrated process is completed only when total income is determine and determination of tax is also made. In the instant case draft order of assessment was framed on 31.03.2013; whereas notice of demand was issued only on 21.02.2014; whereas the assessment has to be framed by 31.12.2013. Thus the assessment made is apparently barred by limitation and is nonest in the eyes of law. In fact it is submitted had this been the contention of the revenue then obviously the assessment had been framed before 31.12.2013 and would have been barred by limitation on that date. 16. The appellant submits that the subject matter of the cross objection which is now being raised by the revenue by invoking rule 27 of the ITAT Rules, despite the fact that such a cross objection has been dismissed may be on the ground that the delay in filing of the cross objection have not been condoned, yet there is merger of such a ground raised in the cross objection. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act by the AO in para 2.1 and para 3 of the final assessment order dated 21.02.2014. However, the AO without jurisdiction, post receipt of the directions of DRP changed the title of the assessment order to 144 rws 144C though there was no such direction issued by the DRP. This itself shows that the action of the AO is completely arbitrary and without jurisdiction. In support of the above, reliance is placed on the judgement of Hon'ble Gujarat High Court in the case of WocoMotherson Advanced Rubber Technologies Limited80 taxmann.com 63. It is submitted that in the said judgment, the Hon'ble Gujarat High Court has held that the learned AO is duty bound to give effect to the directions of the learned DRP. In the instant case, the learned AO acted without jurisdiction when he went to change the filed of the order which is evidently an afterthought. It is submitted that para 2.1 and in para 3, the AOhas held that the draft order of assessment was made u/s 143(3) of the Act read with section 144C(1) of the Act and not that it was made u/s 144 of the Act. 19. Without prejudice to the above, It is an admitted position that if an AO intends to complete the assessment u/s 144 of the Act, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-ab -initio and illegal. 24. It is also submitted that in the present case, provisions of section 145(3) were invoked which provides that the AO has liberty to complete the assessment u/s 143(3) of the Act in the manner provided u/s 144 of the Act. In other words, the assessment so made will still continue to be u/s 143(3) of the Act only. It does not mean that the assessment is completed u/s 144 of the Act. In support of the same, reliance is placed on the judgment of Honble Kerala High Court in the case of Ponkunnam Traders (102 ITR 366)." 17. He therefore, submitted that merely invoking provisions of section 145(3) does not allow the Assessing Officer to pass an order u/s 144 of the Income Tax Act, 1961. He further referred to provisions of section 144 of the Act to state that in clause (a) to (c) of Section 144(1) covers four situations and failure of any of the conditions is not established by the Revenue and therefore, the provisions of section 144 cannot be invoked. He further, submitted that provisions of section 145(3) or its failure does not give any right to the ld Assessing Officer to pass an order u/s 144 of the Income Tax Act, 1961. He therefore pressed upon that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. He therefore contended that assessee cannot take now the plea that order is passed by AO u/s 143(3) of the Act. He stated that what is not contested before the lower authorities cannot be taken as ground of appeal by the assessee. Only recourse available to the assessee was by filing an additional ground of appeal which has not been done. He took us to all the objections of the assessee before the ld DRP. His contention was that the order passed by the ld AO is without jurisdiction or barred by limitation of time was not at all contested by assessee before ld DRP despite quite a lengthy remand proceedings before the ld DRP. He therefore, contested that now there is no reason to agitate this issue before the Tribunal. He further referred to page No. 983 of the paper book which is the ' statement of facts' submitted by the assessee before the ld DRP. He referred to page No. 977, 978, 979, 980, 981 of the paper book to show that assessee has given a false statement before the lower authorities that assessee has been granted the permission to not to include the necessary details as required by the provisions of section 212 of the Companies Act. He submitted that in the Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the real issue is about the amount of investment that has been made in the NDTV Networks International Holding BV was not disclosed. He referred to the page No. 992 of the paper book of the assessee to show that many of the details were submitted by the assessee only as additional evidence before the ld DRP. He therefore, submitted that the accounts of the assessee were not complete and correct and hence are unreliable. 21. He further relied upon the decision of special bench in case of M/s. All cargo Global Logistics Ltd vs. DCIT dated 21.05.2012 to support his contention that only option available with the assessee is to raise the issue of the order being without jurisdiction and barred by limitation is by way of raising an additional ground of appeal, if at all the appeal of the assessee is maintainable, which is not the case before the bench. He further submitted that assessee has not disclosed vital information by not complying with provisions of section 212 of The Companies Act, 1956 and therefore, ld DRP has upheld the piercing of the corporate veil in case of the assessee. He further submitted that therefore the AO rejected the books of account of the assessee applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 144(1) where the notice under sub-section 142(1) has been issued prior to the making of an assessment u/s 144 of the Act, It is not necessary to give any opportunity of hearing to the assessee by issuing a show- cause notice to the assessee that why the assessment should not be made u/s 144 of the Act. He further referred to the provisions of section 145(3) of the Act that where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee then the AO may make an assessment in the manner provided u/s 144 of the Act. He therefore submitted that when AO has rightly invoked the provisions of section 145(3) and also stated that as assessee has not satisfied him about the correctness and completeness of the account the provisions of section 144 has rightly been invoked. 24. He further submitted that provisions of section 144C does not refer to any on the specific section whether section 143(3) or section 144 of the Act, therefore, according to the facts and circumstances of the each case the AO may pass order under any of the above two sections. He therefore, vehemently contested that claim of the assessee that Assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such order" 5. The fact of completion of assessment under section 144 of the Act is admitted by the appellant which fact is evidenced by relevant particulars in Form No 36B read with Rule 14 of the I.T.Rules, 1962 & verified by & on behalf of the appellant on March 3, 2014. It is pertinent to point out that even in the appeal bearing ITA No. 1212/Del/2014 filed by the assessee before the Honble ITAT on 04.03.2014, the assessee has not taken any ground against the assumption of jurisdiction by the AO u/s 144which was also confirmed by the DRP. 6. A question would thus arise as to whether an appealto the Appellate Tribunal is provided against an order of the AO passed u/s 144 read with section 144C(13) u/s 253 of the Act? Clause (d) of sub-section (1) of section 253 of the Act deals with the appellate jurisdiction of the ITAT against orders passed by the AO in pursuance of the directions of the Dispute Resolution Panel, which reads as under: "[(d)an order passed by an Assessing Officer under sub-section(3), of section 143 or section 147 [or section 153A or section 153C] in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 20108, Honble Apex Court held as under:- "Right to appeal is neither an absolute right noran ingredient of natural justice, the principles of which must be followed in all judicial or quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant ................The purpose of the Section is to act in terrorem to make the people comply with the provisions of law." c) A similar view has been reiterated by Honble Apex Court in Anant Mills Co. Ltd. v. State of Gujarat, AIR 1975 SC 12349; and Shyam Kishore &Ors. v. Municipal Corporation of Delhi &Anr., AIR 1992 SC 227910. A Constitution Bench of this court in Nandlal&Anr. v. State of Haryana, AIR 1980 SC 209711, held that the -right of appeal is a creature of statute and there is no reason why the legislature, while granting the right, cannot impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory". d) In Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad &Ors., (1999) 4 SCC 46812, Honble Apex Court held that the righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT to admit an appeal u/s 253 has invited judicial scrutiny by various benches of the ITAT in following cases: 11.1 Honble ITA T-cochin bench examining the scope of provision of section 253 in case of The Sub Registrar V DIT I.T.A. No. 212/coch/2013 & S.A.42/coch/2013 order dated 24.7.201316 has held as under: -5. Now coming to the direction given by the Director of Income-tax (Intelligence) in clause 7 of the demand notice, no doubt, the Director of Income-tax (Intelligence) mentioned In the demand notice that an appeal can be filed before this Tribunal under Part B of Chapter XX of the Income-tax Act. It is well settled principles of law that consent of a litigant party will not confer any jurisdiction on a judicial or quasi judicial authority unless and until it is otherwise conferred by the legislature. Therefore, the consent / direction of the Director of Income-tax (Intelligence) will not confer any jurisdiction on this Tribunal unless it is provided for in the Income-tax Act by the Parliament. Hence, this Tribunal could not entertain the appeal filed by the Sub Registrar, Meppayur-Kozhikode. 6. Coming to the contention of the ld.DR that appeal is provided u/s 246A(q) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 271FA in section 253 may be unintended. Therefore, it is open to the department to bring to the notice of the concerned authority about the omission to provide appeal before the Tribunal for making consequential amendment to section 253 of the Act in case the department found that the omission is unintended. 8. In view of the above discussion, the appeal of the Sub Registrar, Meppayur-Kozhikode is dismissed as not maintainable before this Tribunal. However, it is made clear that it is open to the Sub Registrar, Meppayur- Kozhikode to challenge the order passed by the Director of Income-tax (Intelligence) levying penalty u/s 271FA of the Act before the appropriate forum in a manner known to law." 11.2. Honble ITAT-Cochin in its later decision in case of SRO, Meppayar- Kozhihode v DIT (Intelligence) (2013) 37 Taxmann.com 36 examining scope of section 253 has held as under: -4. We have considered rival submissions on either side and also perused the material available on record. The question arises for consideration is whether this Tribunal could entertain an appeal by the Sub Registrar, Meppayur- Kozhikode against the order of penalty u/s 271FA of the Act. We have careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be filed before this Tribunal under Part B of Chapter XX of the Income-tax Act. It is well settled principles of law that consent of a litigant party will not confer any jurisdiction on a judicial or quasi judicial authority unless and until it is otherwise conferred by the legislature. Therefore, the consent/direction of the Director of Income-tax (Intelligence) will not confer any jurisdiction on this Tribunal unless it is provided for in the Income-tax Act by the Parliament. Hence, this Tribunal could not entertain the appeal filed by the Sub Registrar, Meppayur-Kozhikode. 6. Coming to the contention of the ld. DR that appeal is provided u/s 246A(q) of the Act, no doubt, an order imposing penalty under Chapter XXI is appealable before the CIT(A) under section 246A(q) of the Act. Admittedly, section 271FA falls in Chapter XXI of the Income-tax Act. Therefore, one may claim that an appeal is provided u/s 246A(q) of the Act. We are conscious that the CIT(A) is equivalent in rank that of the Director of Income-tax (Intelligence), therefore, the appeal before CIT(A) may not be an effective and efficacious remedy available to the Sub Registrar, Meppayur-Kozhikode against whom pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immediate reference, we extract the provisions of section 253(6) and the proviso thereto which clearly highlights that the legislature intended to exempt the Revenue from payment of institution fees only with regard to the appeals referred to in sub-section (2). For both the parties in respect of memorandum of cross-objections, no appeal fees is payable. "Section 253(6): (6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made on or after the 1st day of June, 1992, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of,- (a) Where the total income of the assessee as computed by the Assessing Officer in the case to which the appeal relates is one hundred thousand rupees or less, five hundred rupees; (b) Where total income of the assessee computed as aforesaid in the case to which the appeal relates is more than one hundred thousand rupees, but not more than two hundred thousand rupees, one thousand five hundred rupees. (c) Where the total income of the assessee, computed as aforesaid, in the case to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. As AO has not taken any steps to pay the fees, in spite of being intimated to him in the acknowledgment itself, we have no option than to reject the memorandum of appeals preferred, as not maintainable. 4.3 Ld. D.R. also pointed out that ITAT can accept a Memorandum of Appeal by using its discretion. Rule 9 of the Appellate Tribunal Rules, 1963 provides in discretion to the ITAT. Rule 9(3) is as under: "The Tribunal may in its discretion, accept a Memorandum of Appeal which is not accompanied by all or any of the documents referred to in sub-rule (1)." 4.4 As can be seen from the above, if the memorandum of appeal is deficient in its enclosures, as prescribed, then only the Tribunal can exercise its discretion to accept the memorandum of appeal. In the present appeals, the enclosures are not defective but the fee payable as per the statutory provisions of section 253(6) was not paid. Since the Memo of Appeal is not accompanied by the fee, as prescribed, we are of the opinion that there is no discretion to the ITAT to accept Memorandum of Appeal filed, in violation of the statutory provisions. ITAT being a quasi-judicial body under the I.T. Act, it has to follow th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the Tribunal in pursuance to such an order of the Assessing Officer passed u/s 143(3) of the Act. We find that the DRP has categorically stated that it has no jurisdiction to pass any direction in pursuance to the belated objections filed by the assessee against the draft order of the Assessing Officer and in fact, the Panel gave no direction in respect of objections of the assessee. It is also observed that the DRP has also not given any direction to pass the order as per the draft assessment order. In the above circumstances, in our considered view, the instant appeal is not covered by the provisions of section 253(1)(d) of the Act and the instant appeal is not maintainable. We, therefore, decline to admit the instant appeal and dismiss the same in limine." 11.5. The Amritsar bench of ITAT in case of Sub-Registrar, Nakoar v DIT (2012) Taxmann.com 225 examining identical issue of power of ITAT u/s 253 of the Act has held as under: -6.1 From the above, it is clear that no power to entertain the appeals against the order passed under s. 271FA, has been provided to the Tribunal. Therefore, the appeals cannot be entertained by the Tribunal. On the other hand, the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse direction given by the DRP, given effect to in his own order, in respect of any objections filed before this cut-off date of 1.7.2012. Now with this amendment, the Revenue has been given a liberty to file appeal before the tribunal if the CIT objects to any direction issued by the Dispute Resolution Panel, +that has been incorporated in the final assessment order. The point to be underscored is that such a power of filing appeal is restricted only to the cases where 'objection is to the direction of the DRP' and not to the voluntary action of the AO/TPO himself. In other words, if the AO/TPO has decided a point, which has been reversed by the DRP, then an appeal can be filed by the Department against the assessment order on such point(s). The right to file an appeal does not extend to a point decided either way by the AO/TPO himself, which remains intact even after the direction given by the DRP. 12. Similar is the position about filing a Cross objection by the Department, which is covered under sub-section (4) of section 253. As per this provision amended by the Finance Act, 2012,: 'The Assessing Officer ...., on receipt of notice that an appeal against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted on the ground that no appeal is provided against the order passed by the Assessing Officer in this case. 13. To sum up: Following propositions are placed for kind consideration with set of case laws on which reliance is placed in support thereof: S.No Proposition Serial No of case law compilation 1. Maintainability of appeal- 1, 19, 20 & 21. 2. Right of appeal has to be given by express words in a Statute- 2, 3, 8, 9, 11, 12,16, 17, 18. 3. Right of appeal neither a natural nor an inherent right- 4, 6, 7, & 10. 4. Liberal construction of appeal provisions only when appeal is provided in the Statute- 5.5. Right of appeal can be conferred with Conditions- 11. 6. Principle of literal construction of taxing statutes- 13 to 15. Prayer: 14. In view of above, it is humbly stated that appeal of the assessee company against order of the AO u/s 144 r.w.s 144C (13) of the Act is liable to be dismissed in limine&may kindly be so dismissed as being beyond jurisdiction." 26. The ld DR further submitted a note on appeal u/s 253(1)(d) of the Act as under:- "1. The appellant has jurisdiction over the respondent, in respect of which case bearing ITA No.l212/Del/2014, ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is pertinent to mention here the assessee did not challenge assumption of the jurisdiction by the AO u/s 144 of the Act, however, it did take a ground against rejection of books of A/c, which was not pressed before the DRP and was rejected after scrutiny by the DRP and the DRP confirmed assumption of jurisdiction u/s 144 of the Act. The DRP gave categorical findings on the issue under the title "Non-disclosure of vital information" in paras 5.3 to 5.5 of its directions, which are reproduced verbatim as under:- "Non-disclosure of vital information 5.3. According to AO, as per Section 212 of the Companies Act, 1956 as well as the Indian Accounting Standards 7, 12, 18, 19, 27, 28, 33 and 107, the transactions of the subsidiaries were to be consolidated and disclosed in the audited accounts of the assessee since it is the parent company of all the Netherland and UK based companies On being asked, the assessee produced a conditional order dated 03.07.2009 of the Ministry of Corporate Affairs which exempted from attaching the details of subsidiaries with its balance sheet and other accounts in terms of provision of sub-section 8 of Section 212 of the Companies Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment u/s 144 of the IT Act is warranted in this case. The AO issued show cause notice to the assessee before resorting to Section 144 of the IT Act." (Emphasis supplied) Further, in para 5.13 of its directions, the DRP categorically held as under:- "5.13 Therefore, DRP is of the considered view that the corporate veil needs to be pierced in this case as has rightly been done by the AO. The action of the AO to that extent is upheld." Corporate veil cannot be pierced without rejecting the account books of the assessee and without travelling beyond such account books after such rejection. Thus, by upholding the piercing of corporate veil after itself causing enquiries to be made u/s 144C (7), the DRP has upheld the rejection of account books of the assessee and has upheld completion of assessment u/s 144 by the AO. The AO after receipt of the directions of the DRP finalized assessment order u/s 144 r.w.s 144C (13) of the Act on 28.02.2014 in conformity with the directions of the DRP by determining total taxable income of ₹ 838.33 crore. 3. The assessee filed an appeal against the said the assessment order of the AO u/s 144 r.w.s. 144C (13) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of its subsidiary companies along with audited account of the assessee company as well as along with return of income for the year under consideration. (b) The assessee did not make disclosure in terms of paragraph 4 of Accounting Standard notified u/s 145(2) of the Act. [Kindly refer No. 9949(F.No.l32/7195-TPL) dated 25.01.1996] (c) Annual accounts did not follow following Indian Accounting Standards as notified by the Central Government: Ind. AS1: Presentation of Financial statement Ind. AS7: Statement of cash flow Ind. AS12: Income Tax Ind. AS18: Ind. AS19: Employee benefits Ind. AS24: Related Party disclosure Ind. AS27: Separate Financial Statements Ind. AS28: Investment in associates and Joint Venture Ind. AS33: Earning per share Ind. AS107: 7. In view of above facts, that the assessee did not follow Accounting Standards as notified u/s 145(2), a show cause notice was issued u/s 145(3) to the assessee to show cause as to why books of accounts of the assessee should not be rejected and assessment of the company should not completed u/s 144 of the Act. ? In response to the notice, the assessee argued that it was exempted u/s 212(8) of Indian Companies Act, 1956 to at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions of order u/s 212(8) under Companies Act 1956. No reasonable explanation for withholding information about the subsidiary companies of the NDTV has forth come from the assessee during proceeding before DRP. 8. Even though these subsidiary companies were paper companies located in UK, Mauritius, Netherland, Sweden, etc. having no office, employee and known business activities, financial transactions worth several hundreds of crores were routed through these subsidiary companies for benefit of NDTV Ltd. and its management. However, the assessee had seriously restricted the probe by the AO into the issue of substance over form by withholding information about the subsidiary companies. 9. It is pertinent to mention here that accounting standard notified under section 145(2) provide that the accounting treatment and presentation in financial statement of transactions and events should be governed by their substance and not merely by legal form. However, the assessee neither followed the disclosure norms nor had disclosed audited A/c, balance sheet, profit & loss A/c and annual report of subsidiary paper companies in the return of Income of the NDTV Ltd. 10. Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act as contemporanea exposition. Many of the provisions of the Companies Act, like computation of book profit, net profit etc. cannot be put into operation without the rules." The Importance of Accounting standard for implementation of provisions of Income Tax has also been accepted by Hon'ble Apex Court and High Courts in following cases: Challapalli Sugars Ltd. Vs CIT (1975) 98 ITR 167 (SC) CITVsIndo-Nippon Chemical Co. Ltd. (2003) 261 ITR 275 (SC) CIT Vs Woodward Governor India (P) Ltd. (2007) 294 ITR 451 (Delhi) Prakash Leasing Ltd. Vs DCIT (2012)23 Taxmann.com.3 CITVsVirtual soft System Ltd. (2012) 205 Taxmann.257. 12. Provisions of section 145(3) provide that be AO may proceed under section 145(3) under any of the following circumstances: (a) Where he is not satisfied about the erectness or completeness of the accounts; or (b) Where method of accounting cash or mercantile has not been regularly followed by the assessee; or (c) Accounting standards as notified by Central Government has not been regularly followed by the assessee In this case, it is evident from discussion in proceedings paragraphs that the assessee had not followed Accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforestated reasons, an argument that the assessment order should have been passed u/s 143(3) instead of section 144 of the Act is not found tenable. It is pertinent to mention here that assumption of jurisdiction under section 144 of the Act in cases of non-compliance of notices u/s 142(1) is clearly stipulated by clause (c) of subsection 1 of section 144 of the Act and assumption of jurisdiction u/s 144 due to rejection of books of A/c u/s 145 (3) is provided under section 145(3) of the Act by including wordings "...the Assessing Officer may make an assessment in manner provided in section 144".17. Several Courts including Hon'ble Apex Court have approved assessment u/s 144 in cases where books of A/cs were rejected u/s 145(3) of the Act which may be summarized as under:• Kachwala Gems vs. JCIT, Jaipur 288 ITR 10 (SC) • Bastiram Narayan Das vs. CIT (1994) 210 ITR 438 (Bom) • GundaSubahiya vs. CIT (1939) 7 ITR 21 (Mad-FB) • Amitabh Construction P. Ltd. vs. Addl. CIT (2011) 335 ITR 523 (Jhar) For the reasons mentioned in above paragraph 4 to 17, it is concluded that the AO was legally justified in passing assessment order u/s 144 read with sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company filed its return of income for AY 2009- 10 on 30.09.2009declaring loss of (-)Rs.64,83,91,422/-. The return was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny assessment by issue and service of notice u/s 143(2) on 19.08.2010 followed by issue of several notices u/s 142(1) of the Act. During course of scrutiny assessment proceedings, the assessee furnished partial information and did not comply with terms and conditions of notices u/s 142(1) of the Act on certain issues. The assessee was also found contravening provisions of section 145(2) of the Act. After considering replies and arguments as filed on behalf of the assessee, a show cause notice was issued to the assessee to show cause as why assessment should not be completed u/s 144 of the Act. After giving opportunity of being heard and considering objection/replies of the assessee, the AO assumed jurisdiction u/s 144 of the Act as evidenced from last paragraph on page 48 of the draft assessment order. A draft assessment was issued on 31.03.2013 u/s 144/144C(1) of the Act proposing taxable income of ₹ 641.08 crore as against declared loss of ₹ 64.83 crore . (It is to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng agreement with Stock Exchange. The order of the Ministry of Corporate Affairs was issued on 03.07.2009 whereas the audited accounts of the assessee was finalised much before that. In any case, this order exempting the assessee was not retrospectively operative. Therefore, the lapses or omissions of not making full and true disclosure in the audited accounts of the assessee were not condoned by the exemption order of Ministry of Corporate Affairs. 5.4. The AO had asked for details about these transactions through her letters during the course of the assessment proceedings. The AO has mentioned that the requisite information was not produced before ADIT Investigation, Unit-ll(2), New Delhi nor produced before her during the course of assessment proceedings. Therefore, the AO has come to the following conclusion (which is narrated on Page 46 of the draft assessment order): "As the material information which was required under the law to be attached with the balance sheet of the assessee company was neither attached nor being provided pursuant to summons issued by the Department in December 2010 nor in response to notice issued in February 2013, a reasonable belief was formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of jurisdiction by the AO u/s 144 as also confirmed by the DRP. Thus, the assessee admits that assumption of jurisdiction u/s 144 by the AO was correct on facts and in law. 21. Issue 4: Whether application of provision of section 145(3) will lead to assessment u/s 144 of the Act • In a case where the provisions of section 145(3) are attracted, the AO is entitled to make an assessment in the manner as provided in section 144. Provisions of section 144 stipulate that the AO after taking into account all the relevant material which AO has gathered shall, after giving the assessee an "opportunity of being heard" make the assessment of the total income or loss to the best judgement and determine the sum payable by the assessee on the basis of such assessment. The Proviso to section 144(1) further explaining term used "opportunity of being heard" stipulates that such opportunity shall be given by the AO by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to best judgement. It was further provided that provisions of Proviso to section 144(1) shall not apply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons mentioned, it is stated that the AO was legally justified in passing assessment order u/s 144 read with section 144C( 13) of the Act. Prayer: 21. In view of above, it is humbly stated that appeal of the assessee company against order of the AO u/s 144 r.w.s 144C (13) of the Act may be dismissed as being beyond jurisdiction. Annexure-A Note in the case of NDTV regarding non-compliance before the AO and before the DRP 1. Non-compliance of section 142(1) before the AO 1.1 During the assessment proceedings for AY 2009-10, the AO issued notice u/s 142(1) on 22.02.2011, wherein the assessee was required to furnish copies of Balance Sheet, Profit & Loss account, Tax Audit Report with annexures by 28.02.2011. The word 'Balance Sheet' is not defined in the Income Tax Act, 1961. As per the provisions of section 212 of the Companies Act, 1956 as these stood at the relevant period, the Balance Sheet of a holding company shall include copies of the balance sheet, profit and loss account, report of Board of directors and report of auditors, in respect of each of its subsidiaries. However, no such documents in respect of any subsidiary was furnished by the assessee. 1.2 Vide notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. Non-compliance before the DRP 2.1 Out of the above, the following documents were furnished by the assessee before the DRP by way of additional evidence :- (i) Copy of Share Subscription Agreement dated 23.05.2008 between Universal Studios International BV ("USBV"), NBC Universal, Inc. ("NBCU"), NDTV Networks BV ("NNBV"), NDTV Networks International Holdings BV ("NNIH") and NDTV along with copy of share certificate issued by NNIH regarding acquisition of shares by USB V. (ii) Copy of Annual Reports of NBCU for FY 2008, 2009 and 2010 filed before US Securities & Exchange Commission ("US SEC") to support identity and creditworthiness of NBCU. (iii) Copy of Annual Report of NDTV for FY 2009-10 to support transaction with NBCU. (iv) Copy of Annual Report of GE to support that NBCU was part of GE group before it was purchased by Comcast Corporation. (v) Copy of Form 10K filed by Comcast Corporation before US SEC in support of identity and existence of NBCU. (vi) Copy of bank account of NNIH in ING Bank at Kantoorrades, Netherlands as evidence of remittances received from NBCU. (vii) Copy of audited accounts of NNIH in accordance with Companies Act, 1956. (viii) Copy of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge the observation of the AO of invoking the provision of section 144 before the ld DRP. He further submitted that assessee has disclosed complete investment as per page No. 926 of the paper book in its subsidiaries. Therefore, there was no circumstances exists to invoke the provisions of section 145(3) of section 144 of the Act. He further stated that annexure A of the submission of the ld DR with respect to the balance sheet not including the balance sheets of the subsidiaries. He referred to the decision of the Hon'ble Supreme Court in case of 39 ITR 202 specifically at page No. 208 in Charan Das Haridas and Another Vs. CIT to state that the assessee company and its subsidiary companies are different and it does not change the position of income tax of assessee if the accounts of subsidiaries are not available. He submitted that in the present case the ld Assessing Officer should have looked into the income tax laws and not the Companies Act, 1956. 28. He further referred with respect to the controversy in the dates of the approval by the MCA i.e. 03.07.2009 and the date of the board of Director's report dated 30.04.2009 he submitted that annual accounts were printed on 22.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on granting general exemption to all the companies under section 212(8) of the Companies Act, 1956. 6. Intact, in the instant case, the Board of Directors had having regard to the procedural requirements, made an application on 08.05.2009, to the Ministry of Corporate Affairs to grant an approval for waiving publication of the individual financial statement of subsidiaries, which was also granted on 03.07.2009. 7. Having regard to the above, the appellant respectfully submits that once the Ministry of Corporate affairs has specific exemption in respect of the publication of the individual financial statement of subsidiaries, after considering the consolidated audited financial statement, no adverse inference can be validly drawn vis a vis section 212(8) of the Companies Act, 1956 and that too under the proceedings under the Income Tax Act, 1961. It is submitted that Income Tax Act and Companies Act operate in different field and therefore in view of the judgment of the Apex court in the cases of CharandasHaridas v. CIT reported in 39 ITR 202, and Coca Cola Export Corporation vs. ITO reported in 231 ITR 200, section 212(8) of the Companies Act has no application. 8. It is also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his grounds of appeal, the appellant has challenged the validity of instant assessment. 41.2 It is submitted that in this case a draft order dated 31.3.2013 was framed which was titled as "Draft Order u/s 143(3) read with section 144C of the I. T. Act." However in the remand report dated 11.12.2013 (pages 118 of Appeal Set) the learned Assessing Officer had stated that in the draft assessment order, the learned Assessing Officer has expressly invoked the provisions of section 145(3) of the Act and assumed jurisdiction u/s 144 of the Act by rejecting the books of accounts of the assessee and has given a specific finding in this regard at pages: 48 and 49 of the said order(pages 1-62 of Appeal Set). He further submitted that while passing the draft order on 31.3.2013, in the relevant column at the first page, the AO has mentioned the order as passed u/s 143(3) read with section 144C of the Act, which is mistake apparent from record. In his submission, the correct words of the order would be "section 144 read with section 144C(1) of the I.T. Act' 1961". 41.3 It is thus submitted that the learned Assessing Officer had alleged in his report at page 118 (para 2.2) that since the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (1B) of [section 143 or sub-section (1) of section 200A, where the assessee or the deductor objects] to the making of adjustments, or any order of assessment [under sub-section (3) of section 143 [except an order passed in pursuance of directions of the Dispute Resolution Panel [or an order referred to in sub-section (12) of section 144BA][***] or section 144, to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed" [Emphasis supplied] 41.6 In light of the above, the first submission of the appellant is that order dated 31.3.2013 was an order u/s 143(3) of the Act read with section 144C of the Act and was a draft order of assessment. The finding that the said order was an order u/s 144 of the Act is factually and legally misconceived and hence untenable. 41.7 Without prejudice for the sake of an argument assuming the said order was an order u/s 144 of the Act, then the instant order dated 21.2.2014 is barred by limitation and deserves to be quashed altogether. The appellant also seeks to place reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Purshottamdas T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is maintainable under the provision of section 253(1)(d) of the Act. 32. We have carefully considered the rival contentions and perused the orders of the ld Assessing Officer i.e. draft assessment order as well as the final order passed u/s 144 of the Act and the direction issued by the ld Dispute Resolution Panel. The simple issue involved in this contest is that whether the order passed by the ld Assessing Officer can be challenged by the assessee before the coordinate bench or not. Admittedly, the assessee has preferred reference to Dispute Resolution Panel u/s 144C of the Income Tax Act. The provisions of section 144C relates to reference to Dispute Resolution Panel. According to that section the ld Assessing Officer shall first forward a draft of the proposed order of assessment to the eligible assessee which is defined u/s 144C(15)(b) of the Act. In the present case, there is no dispute that the assessee is an eligible assessee in terms of that section. The draft assessment order is required to be passed if the Assessing Officer proposes to make any variation in the income or loss returned which are prejudicial to the interest of the eligible assessee, Within 30 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver such mentioning of the wrong section in the draft of the proposed assessment order cannot render it as "Draft assessment order u/s 143(3) of the act" when there is no such provision in the statue. It is a settled proposition of law that mere mention of wrong provision of the law when the power exercise is available even though under the different provision is by itself not sufficient to invalidated the exercise of that power. The Hon'ble High Court has laid down the above principal in Collector of Central Excise Vs. Pradumna Steel Ltd (2003) 9 SCC 234. The above proposition has been reiterated in following subsequent decisions in Mehboob Vs. Zahira and others 2015 (110) ALR 437, Jagnnath Vs. State of UP and others 2011 (6) ADJ 89, Mehendra yadav Vs. Om Prakash and another 2006 (65) ALR 560, Commissioner of Income Tax Vs. Kay Kay Faimly Trust (2005) 278 ITR 620 (Alld), Commissioner of Income Tax Vs. Asha Family Trust (2005) 148 Taxman 578(all), Eric John Singh Vs. The District magistrate and others 1989 AWC 210 (all), Ram Chandra Misra Vs. State of UP 1982 (8) ACR 419 (all) and Govind Dass and others Vs. Prescribed Authority etc and another 1978 (4) ALR 753. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder is passed u/s 143(3) of the Act. Therefore, it is necessary to look into why and how the Assessing Officer has passed order u/s 144 of the Act and whether the contention of the assessee is correct or not. Therefore , It is necessary to go to the draft assessment order for the relevant reasons /observation of the ld Assessing Officer. At page NO. 45 of 51 of the draft assessment order in para NO. 6 the ld AO has dealt with this issue as under:- "6. Unexplained Money Pursuant to receipt of information from various sources including Honble Members of Parliament and Ld. Members of Bar, it came to the notice of the undersigned that the assessee company was issued summons u/s 131 of the IT Act, 1961 by ADIT(Inv.) Unit-II(2), New Delhi on 27.12.2010 to furnish as under:- (1) List of the subsidiaries of New Delhi Television Ltd. and their subsidiaries along with details of their directors and books of accounts since 01.04.2006. (2) Details of shareholders and investors of these subsidiaries with their names and complete address since 01.04.2006 and brief note on nature of activities carried by each subsidiary. (3) Details of loan given and taken fund raised and investment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Central Government were also found not to be complied with. The undersigned was in receipt of various complaints against the assessee alleging large scale money laundering and resultant evasion of tax which could not be verified because of non- compliance of the Indian Accounting Standard as issued by the Central Government referred to hereinabove by the assessee, the assessee was asked under the provisions of section 142(1) to furnish the necessary details pursuant to which the assessee filed a letter dated 27.02.2013 and enclosed some of the details asked for. However, the details related to M/s NDTV Network Plc was not enclosed though it was stated in the letter to have been enclosed and provided. As the material information which was required under the law to be attached with the balance sheet of the assessee company was neither attached nor being provided pursuant to summons issued by the Department in December 2010 nor in response to notice issued in February 2013, a reasonable belief was formed that the accounts of the assessee are not maintained and prepared in accordance with the Accounting Standards issued by the Central Government and were therefore inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the earlier period. On 30.04.2009 when the accounts of the assessee was finalized and approve by the Board of Directors of the assessee, there was no exemption available to the assessee not to comply with the requirements of sub-section 1 of section 212 of the Indian Companies Act, 1956. And therefore the accounts of the assessee were required to be prepared and finalized disclosing all the details prescribed under section 212(1) of the Indian Companies Act, 1956. The same not having been done, the requirements of section 145(3) of the I T Act, 1961 are not complied with in so much as the accounts of the assessee were in accordance with the accounting standards prescribed by the Central Government as detailed hereinabove and therefore were neither correct nor complete. The OM dated 03.07.2009 being relied upon by the assessee is of no help as it could not have been relied upon by the assessee prior to its issuance which was on or after 03.07.2009. As Central Government did not made the said OM effective retrospectively, the omission of the assessee in so much as not attaching the accounts of the subsidiaries and other prescribed reports with its annual accounts that were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ependent of the requirements of the Indian Companies Act, 1956. In view of the breach of the conditions prescribed 145(3) of the IT Act, 1961 undersigned is not satisfied about the correctness and the completeness of the accounts of the assessee and is of the considered view that the accounts of the assessee as notified by the Central Government has not been properly and completely followed by the assessee. In view of the same as stated hereinabove, the undersigned holds and declares that the provisions of section 145(3) of the IT Act, 1961 is applicable to the case of the assessee for the assessment year 2009-10 in respect of previous year 2008-09 and undersigned thereby and therefore assumes jurisdiction under section 144 of the IT Act, 1961 to determine the true and correct income of the assessee company. From the details submitted by the assessee on 30.03.2013, it is seen that the assessee company alongwith four of its subsidiaries has receipt on through an agreement dated 23.05.2008 has received an amount of ₹ 6,42,54,22,000/- equivalent to US $ 150 Million in lieu of some indirect stake by the claimed lender of the money but has not discharged its primary onus in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares of its subsidiary company and that the subscription price was a negotiated price arrived at between the parties . Subscription to the shares of the subsidiary company of the assessee without determining any valuation for the same and receiving such funds by a foreign party raises suspicion regarding the true nature of the transactions. It is a well settled law that it is the onus of the assessee to prove the identity and creditworthiness of the share subscribers and genuineness of the transactions. Whereas in the instant case, the assessee could not discharge the onus cast upon it to satisfactorily prove the nature and source of the funds received by it. In view of the above, the assessee is found to be the owner of the unexplained money for which it could not furnish any satisfactory explanation. Therefore, the above said sum of ₹ 6,42,54,22,000/- is hereby held to be the income of the assessee from undisclosed sources and the same is hereby added to the income of the assessee." 34. On reading of the above observation of the ld Assessing Officer it is apparent that assessee company was having 21 subsidiaries, however, prescribed particulars u/s 212 of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities in the other laws, we are not impressed in the facts of the present case. It is the case of the company, which is statutorily required to maintain its books of accounts and to prepare its profit and loss account in the manner so provided in the Companies act. The Companies act provides that bal lance sheet and profit and loss should be true and fair and must necessarily disclose certain details. The Income tax Act also prescribes in case of companies to prepare the annul accounts as per the provision of the companies act 1956 . How important it is that can be ascertained by looking at the provision of section 115 JB of the act. Therefore it is too naive to say that ld AO must shut his eyes in the case of the company if it does not prepare its annual accounts in accordance with the provision of the companies act. Wherever there is such requirement , the legislation on its own wisdom has given different treatment/ concessions to such companies such as electricity companies , NBFC , bank etc. The various authorities relied up on by the ld AR also does not say so. Therefore, in case of the companies it is mandatory to prepare their accounts in accordance with the provision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy (a) the extent of the holding company s interest in the subsidiary at the end of the financial year or of the last of the financial years of the subsidiary referred to in sub-section (2); (b) the net aggregate amount, so far as it concerns members of the holding company and is not dealt with in the company s accounts, of the subsidiary s profits after deducting its losses or vice versa (i) for the financial year or years of the subsidiary aforesaid; and (ii) for the previous financial years of the subsidiary since it became the holding company s subsidiary; (c) the net aggregate amount of the profits of the subsidiary after deducting its losses or vice versa (i) for the financial year or years of the subsidiary aforesaid; and (ii) for the previous financial years of the subsidiary since it became the holding company s subsidiary; so far as those profits are dealt with, or provision is made for those losses, in the company s accounts. (4) Clauses (b) and (c) of sub-section (3) shall apply only to profits and losses of the subsidiary which may properly be treated in the holding company s accounts as revenue profits or losses, and the profits or losses attributable to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, direct that in relation to any subsidiary, the provisions of this section shall not apply, or shall apply only to such extent as may be specified in the direction. (9) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 57[ten] thousand rupees, or with both : Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove 58[***] that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty : Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully. (10) If any person, not being a person referred to in sub-section (6) of section 209, having been charged by the 59[***] 60[managing director, manager,] or Board of directors, as the case may be, with the duty of seeing that the provisions of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us the relevant annual accounts of the company for the year ended on 31.03.2009 wherein in the Director's report placed at page No. 1757 to 1761 at page No. 13 of the financial statement signed on 30.04.2009 by one Dr. Pranoy Roy, Chairman as under:- "Financial Statements of the subsidiary companies. The Ministry of Corporate Affairs, Government of India, has granted approval u/s 212(8) of the Companies Act, 1956 for the financial year ended on 31.03.2009, waiving the publication of individual balance sheets, profit and loss accounts, Director's Reports and Auditor's reports of the subsidiaries and other documents otherwise required to be attached to be company's accounts. However, the annual accounts of the subsidiary companies and the related detailed information will be made available to the members of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiaries companies will also be kept open for inspection by any investor in its Registered office and those of the respective subsidiary companies. " (Extracted from the Director's Report dated 30.04.2009 of assessee for the financial year ended 31.03.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermission was also not satisfied. The condition No. V of the above permission also clearly states that holding company i.e. assessee as well as its subsidiaries should regularly file such data to various authorities and govt authorities as may be required by them. Therefore, the above approval by the Ministry of Corporate Affairs has not authorized the company to not to submit the relevant details of its subsidiary company to the ld Assessing Officer. Therefore, non-furnishing of such information along with the requisite details of its subsidiaries and non-compliance with the accounting standard, which is mandatorily to be followed by the company, has definitely rendered the accounts of the assessee as incorrect and incomplete. Therefore, we do not find any infirmity in the order of the ld Assessing Officer in invoking the provisions of section 145(3) of the Income Tax Act and then proceeded in making an assessment in the manner provided u/s 144 of the Act. 43. It is unfortunate that before making an application for exemption the assessee has disclosed in its one of the most important statement i.e. Director's report, the company has announced that it has been granted approval eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails were not complied with in full. The first such notice was issued on 22.02.2011 wherein the assessee was required to furnish the copies of balance sheet, profit and loss account, tax audit report etc. Naturally Annual accounts did not contain the information with respect to the subsidiaries of the assessee. The subsequent second notice was also issued on 15.02.2013 wherein the assessee submitted the details in part. Further, the Assessing Officer required the assessee to furnish the complete details about the investment wherein, the assessee failed to submit before the ld AO such as share subscription agreement along with the share certificate issued, the evidence in support of identity and creditworthiness of the investor and genuineness of the transaction as well as the bank statements of the investor and investee company. This is evident from the fact that some of the documents were filed before the ld DRP as additional evidence. The noncompliance with the notice u/s 142(1) is evident from the Vol-II and III of the paper book submitted by the assessee running from page No. 379 to 741 , which are the additional evidences, filed before the ld DRP. Therefore, we are of the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld DRP is an appealable order before the tribunal. According to the provisions of section 253 of the Act the assessee aggrieved by certain specified order is entitled to file an appeal to the appellate tribunal against such order. The such specified order are as under:- "(a) an order passed by a Deputy Commissioner (Appeals) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals) under section 154, section 250, section 271, section 271A or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or (ba) an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Commissioner under section 12AA +or under clause (vi) of sub-section (5) of section 80G or under section 263 or under section 271 or under section 272A or an order passed by him under section 154 amending his order under section 263 or an order passed by a Chief Commissioner or a Director-General or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is showing computation of total income as well as the computation of demand of tax and also accompanied by the notice u/s 156 of the Act. Therefore, such assessment order is appealable before the ld CIT(A). However, the ld AR is referring to the draft assessment order only and naturally u/s 144C of the Act there is no provision of issuing notice of demand. The notice of demand u/s 156 of the Act is required to be issued only with the final order passed in pursuance of the direction of ld Dispute Resolution Panel, which is not demined by the assessee. Therefore, according to us the tribunal is not right appellate forum where assessee should have filed such an appeal where the order is passed u/s 144 read with section 144C of the Act. Hence, according to us the appeal of the assessee is not maintainable. 51. In view of the above findings that appeal of the assessee is not maintainable against the order passed u/s 144 of the Act we do not take into cognizance the grounds of appeal filed by the assessee. 52. In the result appeal of the assessee listed as ITA No. 1212/Del/2014 for AY 2009-10 is dismissed as non-maintainable. ITA No. 2658/Del/2014 for AY 2009-10 ( by revenue) 53. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisements) do not facilitate sale. But the services provided by the Agency definitely get a substantial amount of revenue in the form of advertisement to the Assessee. In turn the Agency is paid agency commission which is ubiquitously termed as 'commission' by the assessee, in its invoice as reproduced above. It is a well settled proposition that a contract can exist with mutual consent or with intent, where there only has to be an offer and an acceptance which is the case in the present matter.The modus operandi explained by the assessee was that as per 'industry practice1 15% of gross amounts received/receivable by the assessee were withheld by the Agency as its 'commission', as shown in the invoices also. However, the assessee has claimed that it is 'discount or trade discount, which is being retained by the agency and net payment is being made to the assessee. The modus operandi of the assessee becomes clearer when we examine some of the bills/vouchers of Agencies through which the advertisements were procured. The examination of invoice of M/s TLG India Private Limited (Agency) raised by M/s NDTV Ltd. reveals that Invoice Cum Challan was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;Commission' flows directly from the nature of services rendered by the Agency and does not depend on case to case basis as rates are fixed. Since, the said amount withheld by Agency actually constitutes expenditure in the form of 'Commission' the assessee was obliged to deduct tax at prescribed rates, more so because the Agency does not pay from its own pocket but only remits amounts received from client to the assessee. The relationship between TLG India Private Limited (Agent) and that of assessee is nothing but principal to agent because the ultimate principal is the client who makes the payment to the advertiser i.e. assessee though the agent. Hence the deduction of TDS on the gross amount of commission is squarely applicable in the hands of assessee. Since it is not possible for the Individual media company to procure advertisements regularly on its own it utilizes the facilities/services of various Agents/Agencies who procure advertisements on their behalf for telecast in the channels owned by the assessee. It has been explained that the amounts remitted are after deducting @ 15% of gross amount received by Agency. Thus it is clear that for these services, Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194H of the IT Act, it is evident that the commission and brokerage as per Section 194H fall within the purview of inclusive definition per section 194H and work of agency is squarely covered in it irrespective of the nomenclature. The discount as claimed by the assessee is nothing but commission and is very much within the ambit of section 194H of the IT Act. Section 194H reads as follows: 'Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five percent. Provided that no deduction shall be made under this section in a case where the amount of such income or. as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of. or to, the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4xxx 5xxx A question may arise whether there would be deduction of tax at source under section 194H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/principal, deduction of tax at source is requested to be made from the amount of commission. Therefore, the consignor/principal will have to deposit the tax deductible on the amount of commission income to the credit of the Central Government, within the prescribed time, as explained in the succeeding paragraphs.' A plain reading of CBDT Circular 619 clearly establishes the fact that in the cases where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration, deduction of tax at source u/s 194H is clearly applicable. It has been further clarified in the said CBDT Circular that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. Since permission given to agents is to withhold 15 per cent out of advertisement is nothing but a payment made to agents in advance by Doordarshan before remittance of net advertising charges to them by the agents. We are therefore of the view that permission granted by Doordarshan under the agreement to the agencies to retain 15 per cent of the commission amount to payment of commission by them to agents which is subject to deduction of tax at source under section 194H of the Act. It is clear from section 194H that payment includes credit of such sum to the account of the payee or at the time of payment of such income in cash or by the issue of cheque or draft or by any other mode. When the respondent receives 85 percent of the advertising charges from the advertising agency concerned.Doordarshan account full amount as received from the customer for whom advertisement was undertaken, crediting 85 per cent received in their account and simultaneously crediting 15 per cent in the account of the advertising agency. Irrespective of the pattern of account maintained by the respondent, what happens when the agent pay85 per cent of the advertisement charges collected from the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service is rendered. Therefore, the first question that needs to be answered is whether there is a principal-agent relationship between the assessee-airline and the travel agent? For this purpose it would be profitable to look to the definition of an agent in Section 182 of the Contracts Act. Section 182 of the Contract Act reads as follows :- An agent is a person employed to do any act of another or to represent another in dealings with third persons. The person for whom said act is done, or who is so represented is called the principal.1 It is clear from the definition that an agency comes into existence where one person is vested with the authority or capacity to create a legal relationship between person referred to as a principal and an outside third party. Therefore, the basic and essential requisites of an agency ordinarily would be that: (i) The agent makes the principal answerable to third persons whereby the principal can sue third parties directly and renders himself, that is, the principal, liable to be sued directly by the third parties; (ii) The person who purports to enter into a transaction on behalf of the principal would have the power to create, modify or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the advertisers, even though the advertisement is booked through agents. The transactions entered into by the assesse clearly establishes the fact that the agencies act on behalf of the assesse whereby a legal relationship is established between the assesse and the third party (advertisers). Thus, the agents, by entering into such a legal relationship on behalf of the principal, that is the assesse, by issuing receipts of advertisement material and the date on which the advertisement is to be telecast, the agent makes the assesse liable to a legal action by the advertisers i.e. the third party. Further relying upon to the decision of Honble High court of Delhi in the lead case of CIT Vs Singapore Airlines (Supra), The Honble Court held that 'the word discout is normally used to describe a deduction from the full amount or value of something, especially a price (see Black's Law Dictionary VIIth Edition page 477) whereas a commission is defined in Explanation (1) to Section 194H as any payment received or receivable, directly or indirectly by an agent for services rendered acting on behalf of the assesse, is defined in explanation (1) to section 194H as any payment received or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Hon'ble High Court of Delhi are :- (a) The expression 'commission' or 'brokerage' was not given in statutory definition under the Act, one had to take into account the expression as judicially defined. (b) Two provisions which would be relevant for determining the issue and to decide the real nature of transaction between the parties are Section 4 of the Sale of goods Act and Section 182 of the Indian Contract Act. Section 4 of the Sale of Goods Act defines 'sale', where discounts are dealt with. Section 182 of the Indian Contract Act, on the other hand, defines an agent, which definition becomes important to consider as to whether the relationship between the assessee and the agents is that of principal and agent, where commission are dealt with. (c) Commission is prima facie the payment made to an agent for agency work, usuallyaccording to a sale, it may be on advalorem scale, but not necessarily on ad valorem scale. It is the most general word that can be used to describe the remuneration paid to an agent for an agency work other than a salary. (d) Again, a commission is the recompense of reward of an agent, factor, broker or bailee, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions allowed to agents. There are three rungs starting from the advertiser, then comes the agent, finally is the assessee .The assessee has also contended that disallowance of the amounts not shown in the profit and loss or not claimed or not debited as an expenditure cannot be eligible for disallowance u/s 40(a)(ia). In this context, the provisions of Section 40 are elaborated hereunder :- 'Section 40 - Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'profits and gains of business or profession}-(a) in the case of any assessee- (ia) any interest, commission or brokerage, rent,on which tax is deductible at sourceunder Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid or before the due date specified in sub section (1) of section 139 ' The question that remains is that only when the expenses are claimed as a deduction, only then the related amount would be disallowed on account of non-compliance of the provisions. From the invoice raised, as per method of accounting guidance note of ICAI, the assessee is supposed to cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted from the gross receipts, it will have the same meaning as if such sum is 'deducted in computing the income chargeable under the head profits and gains of business' as per the provisions of Section 40. Since TDS has not been deducted as provided under Chapter XVII-B, the provisions of sub section (a)(ia) of Section 40 of the Act are clearly attracted. Reliance is placed in the case of CIT VsLN.Dalmia, 207 ITR 89, and in the case of CIT VsDurgadass More 82 ITR 540 (Supreme Court), the honble Apex Court has held that 'a little probing was sufficient in the present case to show that apparent was not real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into surrounding circumstances to find out the reality of recitals made in the documents.' If Corporate veil is lifted one can see the real picture and modus operandi of the business activities carried out by the assessee. As per reply dt. 07.03.2013, the assessee has submitted details of quantum of advertisement revenue generated to advertising agencies, which amounts to ₹ 235,41,66,296/-, which is net of commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave deducted tax on the gross amount received by the advertisement agency. On the other hand, the assessee had stated that its case is squarely covered by the decision of the jurisdictional High Court in the case of CIT vs. Living Media India Ltd. and in the case of JagranPrakashan Ltd. vs. DCIT [345ITR 288 (2012)] of the Allahabad High Court. The AO has tried to differentiate the decision in the case of Living Media India Ltd. by stating that the assessee is in electronic media whereas the decision quoted is on the facts of print media company. The assessee's submission is extracted below: "The assessee/companies who are engaged in the business of running of print and electronic media houses, the main source of revenue is advertisement charges. The advertisers approach classified agents or accredited advertising agencies to advertise. The agents / agencies upon receipt of advertisement requirement procure the airtime from the media companies at a discount. Advertisers while making payment to accredited agencies duly deduct tax as required under law under section 194C of the Act on the amount paid by the advertiser. This customary practice is consistently followed in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the decision of Delhi High Court cannot be a reason for sustaining the disallowance. In view of this we do not find any infirmity in the direction of the ld DRP in directing the ld Assessing Officer to delete the disallowance commission paid amounting to ₹ 415441111/-. In the result the ground No. 1 of the appeal of the Revenue is dismissed. 57. The second ground of appeal is against the deletion of disallowance of ₹ 78123855/- on account of transmission and up linking charges paid by the assessee to Intelsat Corporation USA without deduction of tax at source. During the course of assessment proceedings it was found by the ld AO that assessee has made payment of transmission and up linking charges of ₹ 145251704/- and out of which a sum of ₹ 78123855/- was paid to M/s. Intelsat Corporation USA. The ld Assessing Officer was of the view that above is deemed income of the recipient u/s 9(1) of the Act and therefore, the assessee was liable to deduct tax at source on such payment. Hence, he disallowed the above sum holding as under:- "4. Transmission and uplinking Charges In the P & L Account the assessee had debited ₹ 14,52,51,704/- under the head Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of programs and by using transmission and up-linking facilities, it sends signals to a satellite that is hovering in space. The signals sent to the satellite are decoded and downlinked over the area covered by the satellite. A transponder is a part of the satellite which receives such signals from the earth stations and re-transmits the same back to the earth with or without amplifying them. The assessee Company entered into an arrangement with Intelsat Corporation, a Company incorporated in and resident of USA for using such transponder capacity, to make the signals available to the cable operators, who in turn beam the signals to the viewers in their homes. The above services are like standard facility used for transmission of programs by various media companies. The assessee Company makes use of such facility during the year provided by the Intelsat Corporation. The assessee Company most respectfully submits the following points for favourable consideration on merits: The payments in question made to Intelsat Corporation are not a "Royalty" within the provisions of Act as they exist during the year in question. (A retrospective amendment is made in Section 9(1)(vi) by the Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were not chargeable to tax in India under section 9(1)(vi) read with section 195 of the Act. Therefore the assessee Company was correct in law in not deducting tax at source on such payments at that point of time. The case of the assessee Company is also supported from the fact that Intelsat Corporation was held not liable to tax in India by the Jurisdictional High Court. Without prejudice to above submissions on merit and in alternate, the assessee Company most respectfully submits that on the facts of the case the disallowance under section 40(a)(i) of the Act is unwarranted as the above provisions are applicable only in a situation where the expenses remain unpaid/payable as on 31st March of the previous year and no taxes have been deducted/deposited on the same, are not applicable in the present case. To support the above, reliance is placed on the decision in the case of Merilyn Shipping & Transports Vs Addl. CIT, 146 ITJ 1, ITAT (Vishakhapatnam) wherein it has been held that section 40a(ia) of the Act can be invoked only to disallow expenditure of the nature referred to therein which is shown as payable as on the date of balance sheet. It is admitted fact in presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd uplinking charges however, looking to the disputes in the various courts and contrary judgments in this regard, a clarification /amendment has been inserted by the Finance Act, 2012 (with retrospective effect from 01.06.1976) which clearly says that the "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal). In view of the present status of the legislation the Transmission and uplinking charges paid by the assessee without deducting any TDS would invite the consequences of provisions of section 40(a)(i). The assessee argument that no technical knowledge has been made available to it therefore it is not covered in the included services. The submission of the assessee is acceptable to the extent that no technical knowledge has been made available. However, for royalty the requirement of make available of technical knowledge is not required under the DTAA. It is only in the case of fee for technical services/include services. Therefore the clause regarding make available in the DTAA will not help the assesse in any way, from the liability of deducting TDS on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has contended that in the case of Intelsat Corporation, the Hon'ble High Court of Delhi vide order dated 28.09.2012 has held that no tax was payable by the company on account of the revenue of transmission and up-linking facilities. In view of this, there is no question of TDS on the amounts payable to Intelsat Corporation. DRP has considered the argument of the assessee. In view of the binding decision coming from jurisdiction Delhi High Court, the contention of the assessee is accepted. The AO is directed to drop the proposed disallowance." 59. Before us the ld DR relied upon the draft assessment order whereas the ld AR vehemently submitted that the issue is squarely covered by the decision of Hon'ble Delhi High Court in case of Intelsat Corporation dated 28.09.2012. He therefore stated that there is no error in the order of the ld DRP. 60. We have carefully considered the rival contentions and also perused the facts of the case as well as the decision of the Hon'ble Delhi High Court. We are convinced with the argument of the ld AR that the issue is squarely covered by the decision of Hon'ble jurisdictional high court. The ld DR could not controvert that how this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain software purchases on its own. The 'up-gradation of software' and under the head 'other software1 were treated as capital in nature by the AO and depreciation at the rate of 60% was allowed by him. However, on going through the details, it is noticed that these software need regular up-gradation or change as per the requirements of fast changing broadcasting industry. The life of these software are for a shorter period and therefore it cannot be said the same is providing enduring benefit to the appellant. For the AY 2006-07 also, my predecessor CIT(A)-XVI has allowed such expenditure as revenue expenditure in para 3.2 of the appeal order dated 30.09.2011 in appeal no. 228/08-09. The nature of software purchased and the business of the appellant for which the software so purchased were applied remains the same. In view of this, the expenditure under the head upgradation of software and other software amounting to ₹ 2,07,009/- and 5,58,006/- respectively is held as allowable deduction during the year. AO is directed to delete the addition made in this regard. " Therefore, DRP is also of the view that these expenditures are revenue in nature and hence allowable. AO is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reversal of ESOP expenditure offered to tax amounting to ₹ 8331150/- in the computation of income in the year under consideration."68. In the above ground of appeal assessee is submitting that ESOP expenditure has already been allowed to it in AY 2006-07, AY 2008-09, however during this year assessee has credited a sum of ₹ 8331150/- which is required to be reversed for this year. Such reversal is also required to be excluded from the income chargeable to tax of the assessee. The ld AR submitted the same plea and ld DR stated that it may be dealt with in accordance with the law by the ld Assessing Officer, as requisite facts are not available at present. 69. We have carefully considered the rival contentions and perused the objection of the assessee. It is stated that ESOP expenditure has already been allowed in AY 200607 of ₹ 33835748/- whereas the assessee claimed it in three different years. The coordinate bench for AY 2006-07 has already dealt with this issue in favour of the assessee. With respect to the reversal of ₹ 8331150/- in the current year as stated by the ld AR it has been credited to the profit and loss account but has not been adjusted in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 2752/DEL/2013 2008-09 3865/ DEL/2014 3996/DEL/2014 4. All the additions which have been raised as grounds of additional crossobjections were made in the assessment order in pursuant to the directions of Honble DRP under section 144C(5) of the Act and as stated above, the assessee had already filed an appeal in ITA No. 1212/Del/2014, raising of all grounds in its ground of appeal. 5. The revenue however in the Cross Objection filed and arising from the appeal No. 1212/Del/2014, has since raised one objection that, the said appeal of the assesee is not maintainable on the ground that the assessment has been framed by the AOunder section 144 of the Act, the assessee in order to avoid, avoidable controversy is seeking permission to raise all such grounds as additional ground of cross objection in the appeal filed by the revenue i.e. ITA No. 2658/De/2014.6. The assessee thus without prejudice to its contention that, appeal filed by the assesee bearing ITA No. 1212/Del/2014 is maintainable, respectfully prays that, it be permitted to raise such ground as additional grounds of cross - objection. Additional/ Modified objections:- Cross objection No. 6:- That the Learned Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 69A of the Act by failing to appreciate that the transaction in question does not pertain to the Appellant and the Appellant is not a party to the said transaction. Cross objection No. 9:- That the Ld. AO/Ld. DRP has grossly erred in law and on facts of the instant case in making an addition of ₹ 2,54,75,00,000/- (as sum equivalent to $50 Million) by invoking provisions of section 68 of the Act purely on extraneous or irrelevant consideration and in failing to appreciate that there was no credits in the books of Appellant and as such section 68 of the Act had no application. 9.2 That the Ld. AO/Ld DRP grossly erred in not appreciating that the borrower of the loan namely NDTV Networks Plc, UK (NNPLC) is a separate assessee which is liable to be taxed separately for its income and no addition is warranted of the aforesaid loan transaction in the total income of the Appellant under section 68 of the Act. Cross objection No. 10:- Without prejudice to Cross objection No. 9 above, that the Ld. DRP exceeded its jurisdiction while directing the Ld. AO to enhance the variations as a result of further enquiry in respect of the loan transaction between the NDTV Networ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt should have been compensated for providing such alleged guarantee. 14.3 That the Ld. AO/Ld. TPO failed to appreciate that the Appellant did not provide any corporate guarantee during the year but merely gave an undertaking to provide guarantee for and on behalf of its AE and had not actually provided any guarantee. 14.4 That the Ld. AO/Ld. TPO erred in computing the arm's length guarantee commission rate erroneously based on flawed methodology and adjustments (without prejudice to the Appellant's contention that it had not provided any guarantee). Cross objection No. 15:- That on the facts of the case and in law, the Ld. AO has erred in levying interest under 234B/D of the Act while completely disregarding the provisions of the Act and the judicial precedence in this regard. Cross objection No. 16:- That on the facts of the case and in law, the Ld. AO has erred in withdrawing interest under section 244A of the Act while completely disregarding the provisions of the Act. Cross objection No. 17:- That on the facts of the case and in law, the Ld. AO has grossly erred in initiating penalty proceedings under section 271(1)(c) of the Act. The above grounds of appeal are mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of CO are with respect to the original grounds taken by the assessee in its appeal. At the time of hearing of the appeal of the assessee we have heard all these grounds of appeal on merits for the sake of completeness because if the appeal of the assessee survives on the issue of maintainability then the appeal would have been required to be heard once again which would have caused great hardship to both the parties. Therefore, we have heard the appeal of the assessee on all the grounds including the ground of maintainability. While deciding the appeal of the assessee we have held that as the order passed by the ld Assessing Officer is u/s 144 of the Income Tax Act against which the appeal of the assessee is not maintainable. The assessee has raised the similar grounds now in this cross objection. It is undisputed that all these issues has arisen out of the order of the ld Dispute Resolution Panel and ld Assessing Officer. The assessee has also given reasons that why it could not be raised earlier. Further, the grounds raised could not be raised by the assessee for bonafide reason. In view of this in the interest of justice we admit additional grounds of cross objection raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the money received by the assessee through its subsidiary on account of this investment by other company is not as per the fair value of the shares and vide agreement dated 23.05.2008 of which assessee is a party therefore, the above transaction is covered by the provisions of section 69A of the Income Tax Act. The ld AO further held that assessee submitted only at the fag end of the assessment proceedings that the sum was received by its subsidiary deliberately so as to avoid further scrutiny with regard to identity and creditworthiness of the sale subscriber and genuineness of the transaction. The ld Assessing Officer was further of the opinion that the transaction of the share capital is more doubtful in view of the admitted fact by the assessee that the share issue price are not supported by any valuation report. Therefore, he made an addition of ₹ 642,54,22,000/- to the total income of the assessee. Assessee being aggrieved with the order of the ld Assessing Officer preferred objection before the ld Dispute Resolution Panel. The ld Dispute Resolution Panel vide para No. 5 of the direction held as under:- "Unexplained money added u/s 69A of the IT Act Shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post acquisition of 31.4% stake in NNIH by Universal Studios BV, the indirect shareholding of NDTV in NDTV Networks Pic was 66% [(100% * 68.6% * 90% * 92%) + (10% * 92%)] 5.2 NBC Universal Inc. is an incorporated entity in United States of America. This company has a 100% subsidiary called Universal Studios BV, Netherlands. The transaction which is the subject matter of this dispute is related to the acquisition of shares of NDTV Network Pic., UK (NNPLc) by Universal Studios BV, Netherlands indirectly by subscribing to the shares of NNIH Netherlands. This transaction took place during the course of the Financial Year i.e. 2008-09 which is relevant to the present assessment year i.e. 2009-10. The shares were sold for INR 642 croresand were bought back by NDTV Networks BV, Netherlands for INR 58 crores in the next financial year. The starting point of the enquiry and all other subsequent proceedings are revolving around this transaction. Non disclosure of vital information 5.3 According to AO, as per Section 212 of the Companies Act, 1956 as well as the Indian Accounting Standards 7, 12, 18, 19, 27, 28, 33 and 107, the transactions of the subsidiaries were to be consolidated and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be rejected' in accordance with Section 144 of the IT Act and why the assessment should not be concluded under that section. Further, the AO also contended that the assessee has also failed to comply with the requirements of Income Tax Act as well. On Page 46 to 48 of the draft assessment order, the AO has given reasons for rejection of the books of accounts of the assessee and why best judgment assessment u/s 144 of the IT Act is warranted in this case. The AO issued show cause notice to the assessee before resorting to Section 144 of the IT Act. 5.6 The AO examined the selling of shares of NDTV Networks Pic, UK and buying back of the same within a short span. Neither the buyer nor the seller had done any valuation of the shares from an independent valuer. The price of the shares was claimed to have been negotiated by the buyer and the seller based on the proposed business potential and business forecast and projections. The AO has come to the following conclusion which is reproduced for the sake of convenience: "In view of the above, it is held that assessee has failed to discharged its primary onus cast upon it and therefore the entire amount received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. 1) Neither NNIH nor NNPLC were having any business activities. NNIH was a holding company and NNPLC was incorporated to promote the interest of NNIH and other group companies. 2) NNPLC did not have any business activity nor any fixed assets and there was no rent paid. Apart from incorporation in the United Kingdom (UK), NNPLC had no presence in UK. 3) The address of NNPLC in UK was that of a company secretary dealing with its tax matters. 4) Directors of NNPLC were Indian and the ultimate owner of this company is assessee itself. The step down subsidiaries of the assessee and the share holding structure make it very clear that the assessee is in control of all its subsidiaries. (See the diagram above) 5) The authorized share capital of NNPLC was only about ₹ 46 lakhs. 6) NNPLC had declared a loss of ₹ 8.67 crores for the year ending 31.03.2009. 7) The shares of NNIH was not valued by an independent valuer at the time of transaction. 8) The value of the share of NNIH at the relevant time of transaction was $ 1 per share i.e. around ₹ 40 to ₹ 50 approximately. These shares were sold/ subscribed at the rate of ₹ 7015.05 per share to Universal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee are summarized in the following paragraphs. 1) India has a tax treaty with Netherlands. Netherlands is a well governed tax jurisdiction. The subsidiaries of the assessee are located in Netherlands for the purpose of business. 2) Universal Studios BV is a subsidiary of NBC Universal USA which is in turn owned by GE Corporation USA. GE Corporation is one of the world renowned corporations which has well established internal governance. It is a listed company in US. It has a huge and deep pocket to invest in ventures across the globe. This group has invested into the shares of NNIH Netherlands. The creditworthiness of this group who has bought/ invested into the shares of thesubsidiary company cannot be doubted. 3) The assessee also filed annual reports of NBC Universal for FY 2008 to 2010 filed before the SecuritiesExchange Commission USA. Further, a copy of the annual report of GE Corporation, copy ofbank account of NNIH in ING Bank Netherlands, copy of the auditedaccount of NNIH were produced before the AO to establish the genuineness of the transaction. The holding structure of the NBC Universal is public available document. The transaction was recorded in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to record the transaction of its subsidiary in its books of accounts. The bank account of the subsidiary company was given to the AO. The source of money is from a well known group of companies in the US. The money has come through the banking channels. Assessee has made all efforts to explain the source of money to the best of its abilities. There is a full disclosure on the part of the assessee. Therefore, AO cannot make any addition only on the basis of suspicion. There is no evidence to back the theory of money laundering. 9) Assessee relied on the following judgments to strengthen its claim apart from relying on Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Netherlands: a) G.V. Films Ltd. vs. S. Priyadarshan and Anr. (C.S. No. 454 of 2005, O.A. Nos. 543 and 2302 of 2005 and W.P.M.P. No. 19093 of 2005 and W.P. No. 17576 of 2005) b) Vodafone International Holdings B.V. vs. Union of India and Anr. (Civil Appeal No. 733 of 2012 (Arising out of S.L.P. (C) No. 26529 of 2010)) c) CIT vs. K.T.M.S. Mahamood (Tax Case No. 1117 of 1984) d) Chuharmal vs. CIT, M.P. (Special Leave Petition (Civil) No. 1863 of 1986) Consideration of the DRP 5.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions. The G20 asked OECD to address this growing problem by creating this action plan to address base erosion and profit shifting. This plan identifies a series of domestic and international actions to address the problem and sets timelines for the implementation." The introduction to Action Plan On Base Erosion And Profit Shifting document has the following statement which is pertinent in this case which is reproduced for the ease of reference. "These developments have opened up opportunities for MNEs to greatly minimize their tax burden. This has led to a tense situation in which citizens have become more sensitive to tax fairness issues. It has become a critical issue for all parties: ■ Governments are harmed. Many governments have to cope with less revenue and a higher cost to ensure compliance. Moreover, Base Erosion and Profit Shifting (BEPS) undermines the integrity of the tax system, as the public, the media and some taxpayers deem reported low corporate taxes to be unfair. In developing countries, the lack of tax revenue leads to critical under-funding of public investment that could help promote economic growth. Overall resource allocation, affected by tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to its economic substance and impose the tax on the actual controlling Non-Resident Enterprise. Thus, whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction. It is in the above cases that the principle of lifting the corporate veil or the doctrine of substance over form or the concept of beneficial ownership or the concept of alter ego arises. There are many circumstances, apart from the one given above, where separate existence of different companies, that are part of the same group, will be totally or partly ignored as a device or a conduit (in the pejorative sense). 68. The common law jurisdictions do invariably impose taxation against a corporation based on the legal principle that the corporation is "a person" that is separate from its members. It is the decision of the House of Lords in Salomon v. Salomon (1897) A.C. 22 that opened the door to the formation of a corporate group. If a "one man" corporation could be incorporated, then it would follow that one corporation could be a subsidiary of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fiscal nullity it would be open to the Revenue to discard such interpositioning of that entity. However, this has to be done at the threshold. In this connection, we may reiterate the "look at" principle enunciated in Ramsay (supra) in which it was held that the Revenue or the Court must look at a document or a transaction in a context to which it properly belongs to. It is the task of the Revenue/Court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not to adopt a dissecting approach. The Revenue cannot start with the question as to whether the impugned transaction is a tax deferment/saving device but that it should apply the "look at" test to ascertain its true legal nature [See Craven v. White (supra) which further observed that genuine strategic tax planning has not been abandoned by any decision of the English Courts till date]. Applying the above tests, we are of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/ Courts should keep in mind the following factors: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of NNIH by NBCU is not a normal transaction and lacks commercial purpose or economic substance in view of the facts as discussed in para 2.3.9 above. Hence, not only the assessee has failed to discharge its onus u/s 68 / 69A as claimed by the assessee, but also in the present case, the facts of the case cast a serious shadow on the genuineness of the impugned transaction, which has neither any commercial purpose nor any economic substance. 2.3.11 The assessee has also contended that regarding the subscription rate, share premium forms part of share capital and is to be decided by the Board of Directors. It is contended that there is no bar in law regarding the amount of premium that a company can charge. However,it remains to be a part of the share capital only. It is further contended that the channels of NDTV had a huge potential for growth and hence, it formed direct and indirect subsidiaries abroad to attract foreign investment, one of which is NNPLC. It is also contended by theassessee that the investments of NNPLC in various companies of entertainment verticalsalready existed much before the share subscription and all those invested companies were functional. On this basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a loss of ₹ 584.46 crores for NBCU and to bring the taxable income of the assessee amounting to ₹ 642.54 crores, earned from undisclosed sources, into the books of accounts of the assessee through its subsidiaries. This subscription of shares, of the assessee's group company, having face value of ₹ 40-45 per share by NBCU @ ₹ 7,015.05 per share and its subsequent sale back to the assessee's another group company @ ₹ 634.17 per share, is therefore a sham transaction and it is a fit case, which requires the lifting of the corporate veil. 2.3.11.2 It is settled law that if an arrangement has no commercial purpose or economic substance and its purpose is merely to evade tax and to constitute sham, colourable or bogus transactions with the pretence of corporate and commercial trading, then in such circumstances, it is not only possible but necessary to lift the corporate veil. Once we lift the corporate veil in the context of the impugned transaction in the present case, the clear facts emerging regarding the transaction reveal that the transaction isengineered to result in claim of loss to NBCU and corresponding routing of the assessee's own u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing and roving enquiries to tax the aforesaid sum on one pretext or the other. 2.3.15 Regarding the above, it is observed that the assessee's contention is factually Incorrect. It Is Incorrect to suggest that the Hon'ble DRP's directions were limited to objections with respect toadditions made under section 69A of the Act and were to examine the additionalevidence filed by the assessee vide applications dated 29.04.2013 and 24.10.2013. As stated in para 2.1.4 above, the Hon'ble DRP remanded the matter regarding proposed addition of ₹ 642,54,22,000/- u/s 69A with directions to ascertain the taxability of this sum for AY 2009-10. Hence, the assessee's contention, being based on a factual inaccuracy, is not acceptable. 2.3.16 In view of the above, it is submitted that it is necessary to lift the corporate veil in the case and to assess the transaction in view of its real purport.2.3.17 In its further reply dated 10.12.2013, the assessee has reiterated its earlier contentions, which are repetitive in nature and have already been addressed in the earlier part of this report. The assessee has further discussed the ingredients of section 69A and has contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the transaction also results in arising of income from capital gains in the hands of the assessee. 2.3.18.2 At the cost of repetition, it is stated that during the year under consideration, the assesse New Delhi Television Ltd. (NDTV), along with four of its subsidiaries namely NDTV BV, NDTV Networks BV (NNBV), NDTV Networks International Holdings BV (NNIH) and NDTV Networks Pic (NNPLC), had entered into an agreement dated 23.05.2008 with NBC Universal Inc. (NBC) and Universal Studios International BV (USBV). As a result, an amount of ₹ 642,54,22,000/- (US $150 million) was received during the year by NNIH. The amount was received on account of subscription of 915,498 shares into NDTV Networks International Holdings BV equivalent to 26% effective indirect stake in NDTV Networks Pic. 2.3.18.3 The corporate structure used for the transaction is as under 2.3.18.4 From the above, it is clear that NDTV had a 56.80% stake in its indirect subsidiary NNPLC, 915,498 shares (26% equity) of which was reduced on account of referred transaction with NBC and USBV as stated above. As per the provisions of the Income Tax Act, 1961rthe Act"), the transaction attracts tax on resultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 45 of the Act." 5.15. Further, the AO was asked to summarize his oral submissions presented before the DRP during the course of hearing on 23.12.2013. The AO summarized his oral argument and filed a letter dated 26.12.2013. The relevant part of which is reproduced below:" 2.1.17 From the above position as reflected in the Annual Reports of the assessee, which are also available on the assessee's website http://www.ndtv.com/ converaence/ndtv/corDorateDage/annual reports.asox?Daae=fr. it is observed that the assessee company had incorporated NNPLC in UK in November, 2006 as its 100% subsidiary and thereafter, NNPLC was made subsidiary of NNBV, when a month after incorporation of NNPLC, NNBV was incorporated in December, 2006. Thus, being 100% subsidiary, NNPLC was conceived and controlled by NDTV. Although NNPLC cannot be said to be an agent or mere extension of NDTV solely on the ground of its being 100% subsidiary of NTDV, the facts regarding the control exercised by NDTV over the affairs of NNPLC are discussed below. 2.1.18 NNPLC was incorporated on 30.11.2006 with a meager capital of about ₹ 40 lacs only and was liquidated on 20.10.2011. The stated pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted income from undisclosed sources with the help of this reflected transaction. Out of this, ₹ 254.75crores is stated to have been transferred in the account books of NNPLC in the shape of unsecured loan from NDTV BV. Again, the assessee NDTV is aparty to the Loan Agreement. 2009-10 (i) NDTV through its subsidiary NDTV Networks B V repurchased 26 percent indirect stake held by NBCU in NNPLC. (ii) NNPLC repurchased US$ 100 Million Step up Coupon Convertible Bonds issued by it earlier. i)NDTV has stated in its Annual Report that NDTV through its subsidiary NDTV Networks BV, repurchased 26 percent indirect stake held by NBC Universal Inc., in its subsidiary NDTV Networks Pic. Though the shares purportedly subscribed, not purchased, by NBCU were those of NNIH and not of NNPLC, the 2nd in vertical subsidiary of NNIH, yet it can be seen that the emphasis is on NNPLC and there is no reference to NNIH or NDTV BV. It is further pertinent to mention that the repurchase, occurring barely after 18 months, was for about ₹ 58 crores only as against the 'purchase' for ₹ 642.54 crores. There is no rationale in this transaction - no commercial purpose or econom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prejudice to this, NNPLC is beyond doubt an agent of NDTV. 2.1.21 As such, it is a fit case, in which corporate veil needs to be lifted and once the veil is lifted, with regard to the present proceedings for AY 2009-10, it can be observed as under :- (i) NDTV through NNPLC has introduced its own unaccounted income from undisclosed sources amounting to ₹ 642.54 crores in the garb of equity subscription. Detailed report regarding taxability of this sum has already been submitted to the Hon'ble DRP vide letter no. 1794 dated 11.12.2013. NDTV through NNPLC has enhanced the liability on account of Step Up Coupon Convertible Bonds by ₹ 110.50 crores in the Balance Sheet of NNPLC from ₹ 399 crores to ₹ 509.50 crores, which is stated to be on account of currency translation. Further, NDTV has Introduced unsecured loans amounting to ₹ 254.75 crores from NDTV BV in the books of NNPLC. The tax implications of this issue are the subject matter of the present report, which necessitated the lifting of corporate veil first, as discussed in the preceding paras of this report* [Bold and underlined lines In flower brackets are added by the DRP] 5.16 DRP has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee has brought an amount of ₹ 642,54,22,000/- being unexplained money in to its books through its subsidiary NDTV Networks BV Netherlands. It is pertinent to mention that, as per the admission of the assessee the above subsidiary has been subsequently liquidated, which shows that the same was floated only to create a front for introducing the above amount. 5.16.2. The DRP has considered the addition proposed by the AO and finds the addition is fully justified in view of facts mentioned above. The DRP is of the considered opinion that the facts of the case fits for making addition u/s 68 of the IT Act as unexplained cash credit. Even addition u/s 69A as proposed by the AO is also justified, as after lifting the corporate veil, the assessee is found owner/ controller of the money under reference. 5.17. AO has brought to the notice of the DRP through his letter dated 20.08.2013 forwarded by the Addl. CIT,Range-13, New Delhi that an amount of ₹ 365.25 crores was raised by the assessee company which needed further examination. The relevant part of the letter of the AO is as under: "10. Another issue involved in the case is that during the year, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said assessment proceedings and the AO had also obtained information from HMRC through FT & TR. Vide further reply dated 29.11.2013, the assessee also filed copy of exchange rates for the relevant period. 2.4.4 Vide this office's letter dated 05.12.2013, the assessee was confronted as under :- "2.2 Regarding the raising ofRs. 365.25 crores as unsecured loans 2.2.1 Regarding the raising of an amount of ₹ 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. Youhave stated in your reply filed on 26.11.2013 that sum of ₹ 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of ₹ 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertions. 2.2.2 In your above reply, you have also alleged as under :- "Further; the complete list of the subscribers of bonds, subscript ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oregoing paras of this letter read with letter dated 27.11.2013, please explain and substantiate your position." 2.4.5 In response, vide letter dated 10.12.2013, the assessee stated that out of the total addition of ₹ 365.25 crores appearing in the Balance Sheet of NNPLC, an amount of ₹ 110.50 crores was on account of adjustment of fluctuation in exchange rate of currency and regarding the balance amount of ₹ 254.75 crores, the assessee stated that this was the unsecured loan obtained from NDTV BV. However, no confirmation was filed nor this office was afforded any verification regarding the creditworthiness of the lender or the genuineness of the transaction. In the absence of these, the assessee has not discharged its onus u/s 68 and there is no alternative but to propose that the amount of ₹ 254.75 crores may be added to the assessee's taxable income for the year under consideration. Further, it is pertinent to mention that although the assessee claimed that "the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09", yet no such deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for A Y 2008-09 and also through information obtained from UK tax authorities through FT & TR. It was contended that complete details regarding investors and source of investment was given to the AO at the relevant time. The details were also stated to have been furnished before Investigation officer and DIT (Inti) during enquiries by these officers. 2.2.2 Vide this office letter dated 05.12.2013, the assessee was informed that no such documents were found in the aissessment record for AY 2008-09. The assessee vide letter dated 09.12.2013 stated that it was again filing copy of the submission dated 08.02.2012 filed in the course of assessment of AY 2008-09 before AO, which consisted of the complete list of the subscribers to bonds, subscription agreement and other relevant details and documents enclosed as Annexure B. Copies of submissions dated 28.05.2012, 31.05.2012, 11.06.2012 and 20.07.2012 stated to have been filed before the then AO and copies of submissions dated 18.02.2011, 03.03.2011, 08.03.2011, 29.03.2011 and 30.03.2011 stated to have been filed before the Investigation Officer and DIT were also claimed to have been enclosed as Annexure C1-C5. 2.2.3 However, perusa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of NNPLC and NDTV Networks BV and the copies of the financials statements of both the above subsidiaries were filed before the Ld. AO during the course of assessment vide submission dated 27.02.2013 & 11.03.2013. The copies of the said submissions were claimed to be duly enclosed as Annexure El & E2 of the reply dated 09.12.2013. 2.3.4 I have perused the assessee's letters dated 27.02.2013 (running into 10 pages)&11.03.2013 (running into 2 pages) marked as Annexure El and Annexure E2 respectively. At the outset, it is submitted that there is no reference to the impugned issue of unsecured loans amounting to ₹ 254.75 crores raised during the year. The contents of the referred letters address certain queries raised by the AO and query regarding unsecured loans is not one of such queries. The bare letters are not even supported by any Annexures mentioned ion the said letters. 2.3.5 Under the circumstances, when the attached annexure-less letters do not contain any reference to query regarding unsecured loans nor attempt to address such query, therefore, filing of such letters does not serve any purpose. 2.3.6 It is pertinent to mention that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any interest, the reason for which has not been explained. The amount involved is quite a large sum of money. Further, as per this document, the interest free credit facility was to be granted on the basis of a duly completed utilization request, where as no such utilization request or basis fpr seeking the above credit facility has been produced by the assessee before the AO or before the DRP. We are therefore in agreement with the AO's finding that the onus of proving the genuineness of the loan transaction has not been discharged by the assessee. The AO is, therefore, directed to make addition of ₹ 254.75 crores." 77. Based on the above direction of the ld DRP, the ld Assessing Officer held that transaction involved in the receipt of ₹ 642,54,22,000/- by the assessee's company during the year is a sham transaction through which the assessee has introduced its own unaccounted money and therefore, it represents the unexplained money owned by the assessee regarding the nature and source of which the assessee has not been able to offer satisfactory explanation, hence, the ld AO made the addition u/s 69A of the Act of ₹ 6425422000/-. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the schedules to the accounts of the investee company wherein the details of investment is mentioned. He further referred to the confirmation letter dated 01.08.2013 placed at Page No. 668 and 669 to show the confirmation of the investor company. He also referred to page No. 670 to 673 of the paper book to show the share issue deed evidencing that the shares were issued to the investor company on receipt of share capital of US$ 150 million. He further referred to page No. 674 to show the bank certificate from BNP PARIBAS from which account a sum of US$150 million was transferred to the account of the investee company. He further referred to page NO. 722 to 725 of the paper book which is a Apostled company of confirmation from the investor dated 11.12.2013. He further referred to page No. 676 to 718 wherein, the annual report of Universal Studios International BV for 2008 was submitted . He referred to the fact that the investor company has invested in the investee company. He specifically referred to page No. 692 to 693 of the paper book to show that investor company has acquired 31.4% participating interest in the investee company. He further submitted that investor is a part of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup downloaded from Wikipedia to state that investor company is a very large group of highest repute which was founded in 1926 and therefore allegation against such a group is unfounded. He further submitted that all receipts are not income and in the present case whatever is received is on account of share capital which cannot be considered as income at all. For the proposition, he referred to the decision reported at 27 ITR 532. 80. He further submitted that subsidiary of the assessee company has issued share capital to the company evidencing the identity, creditworthiness and genuineness of the transaction. He further referred to the decision of Sofia Finance Ltd 205 ITR 98 and further referred to page No. 104 of that decision. He submitted that if the amount credited is capital receipt then it cannot be taxed but it is for the income tax officer to be satisfied that the true nature of the receipt is that of capital. He submitted that the amount received by the subsidiary is on account of capital receipt. He further referred to the decision of Hon'ble Delhi High Court in case of CIT Vs. Kamdhenu Steel and Alloy Ltd 361 ITR 220 to submit that assessee is explaining source of mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the investor, the transaction is deserved to be accepted. 84. During the course of hearing he made an offer that assessee is ready to produce the investor before the bench. In the end he requested that his submission at page No. 43 onwards which are as under may further be considered:- Sr. No. CONTENTION OF THE APPELLANT: 26 GROUND NO. 3 TO 3.3 OF GROUNDS OF APPEAL" ADDITION OF ₹ 642.54.22.000/- REPRESENTING ALLEGED UNEXPLAINED SHARE CAPITAL RAISED BY THE SUBSIDIARY OF THE APPELLANT COMPANY AND. BROUGHT TO TAX BY HOLDING THE SAME TO UNEXPLAINED MONEY U/S 69A OF THE ACT 26.1 The crux of the dispute in the present case is, whether the learned A.O. was correct in holding that the amount received by way of subscription of shares by NDTV Networks International Holdings BV of the subsidiary is assessee's own money and the transaction of issue of shares by assessee's subsidiary to M/s Universal Studios International BV is a sham transactions despite the fact that the identity, existence of the aforesaid shareholder was duly established in terms of the judgment of Apex Court in the case of CIT v Lovely Exports (P) Ltd reported in 319 ITR 5 (St.) 26.2 It is subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired shares of M/s NDTV Networks International Holdings BV. iv) Such shares were acquired through banking channel, when it made the payment of USD 150 million. v) That the said shareholder of the assesses's subsidiary is a subsidiary of NBC Universal Inc. vi) That the holding company of M/s NBC Universal Inc. is a company incorporated in USA and is a group company of GE group companies. vii) That the investee company had acquired the said shares through payment by banking channels which were duly entered in their books of accounts and is also reflected in their balance sheet. viii) The said shares so acquired were duly confirmed in writing to have been acquired by M/s Universal Studios International BV 26.7 In fact, despite the fact that the assessee had furnished such confirmation before the learned Assessing Officer, in the course of remand proceedings, he still ignored such confirmation and went on record in his order of assessment that the assessee had not furnished such confirmation (page 126 of Appeal Set). 26.8 There is no denial by the said investee company that it had made no such investment. There is no material on record by the revenue in support of the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c submission which the assessee seeks to make is, that the finding/observation/allegation of the A.O. and the DRP that the transaction is sham is merely a matter of conjecture, surmises and is based on illogical conclusion which it is submitted is unilateral. It is submitted, though it may be permissible for tax authorities to draw inference yet such inference had to be drawn based on material and not on mere ipsi-dixit. 27 In the instant case, it is submitted that, the findings of the authorities that the 'transaction is sham is based on a finding that the structure of the assessee company is complex (see para 5.1 page 3 of Appeal Set). It is respectfully submitted that, appellant had not been able to comprehend the basis for such finding and conclusion. It is apparent that the basis for such an allegation is that, it has large number of companies, who are its subsidiaries. It is submitted firstly, that out of twenty one subsidiaries, 10 companies are incorporated under Companies Act 1956 in India and the remaining 11 companies are incorporated outside India under the respective laws of such companies. The fact that, there are large numbers of subsidiary company does not by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany namely NDTV Networks International Holdings BV (NNIH) (a company incorporated as per the laws of Netherlands and resident of that country) on May 23, 2008. Thus, it is most respectfully submitted that the action of the Ld. AO in making said addition in the hands of the Appellant company (ultimate holding company) and the action of the 27.3 In order to come over from well settled legal position of distinct and separate entities of corporate personality, both AO and DRP had made ingenious attempt to invoke the doctrine of lifting of corporate veil on misconceived grounds. It well settled in legal jurisprudence that the corporate veil could be lifted in the case of fraud or sham or any device designated to defeat the interest of shareholders, investors and contractual parties. No doubt, the revenue is entitled to invoke the lifting of corporate veil if the facts so warranted, but the onus is on Revenue to establish the dominant object of the transaction and how the said transaction resulted into evasion or avoidance of tax. It is most respectfully submitted that the revenue on the facts of the case failed to bring any material on record which could establish that the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad) CIT vs. Electro Polychem Ltd. iii) 166 Taxman 7 (All) Jaya Securities Ltd. vs. ACIT iv) 307 ITR 334 (Del) CIT vs. Value Capital Services Pvt. Ltd. v) 361 ITR 10 (Del)CIT vs. Gangeshwari Metal (P) Ltd. vi) 361 ITR 147 (Del) CIT vs. Expo Globe India Ltd. vii) ITA No. 298/2012 (Del) dated 16.5.2012 CIT vs. Dalmia Bros Pvt. Ltd. viii) 45 taxmann.com 204 (All) CIT vs. Vacment Packaging (India) (P) Ltd It is submitted that on the basis of the aforesaid Apex Court judgement, the Honble MP High Court has further held that the settled rule of law is that where an investor being a foreign company (not taxable in India) makes an investment by acquiring shares, no addition could legally be made. It has been further held that the aforesaid judgement of the Honble Apex court is binding authority under Article 141 of the constitution of India. 27.5 In view of the above, it is submitted that it absolutely cannot be a case of lifting the corporate veil as the transaction in question could not be termed as fraud or sham or device designated to avoid tax liability, especially when the assesee beyond any suspicion established and discharged its onus to prove the identity and creditworthin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs BV vs. UOI reported in 341 ITR 1 27.8 At the outset it is submitted that the aforesaid observations of the Apex Court have absolutely no application to the facts of the instant case. In the said case, the issue involved was whether the transaction of sale of shares outside India was a bonafide transaction and, if the answer to the question was affirmative, whether the assessee would be liable to tax in India in respect of the transfer of shares under the head 'capital gains'. 27.9 It is submitted that the issue involved however in the instant appeal as to whether the assessee is liable to be assessed in respect of the amount received on issue of shares by its subsidiary to another unrelated company M/s Universal Studios International BV, who has made investment in acquiring the shares and has so admitted to have made investment. It is thus submitted that the issue involved in the two cases are different. 27.10 However, without prejudice thereto, to the above submissions it was held by the Apex Court in the said case that, if the transaction is between two independent companies, the 'look at' theory is to be applied instead of 'look through theory. It is thus submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt purpose. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colorable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must exist to overcome the evidence of a device 27.15 It is submitted that the said observations had been made by Apex Court in the context of taxability of capital gain or business income and not in the context of any investment when is made by an identifiable identity. The court has held that, substance over form and piercing the corporate veil are permissible only after it is able to establish that impugned transaction is a 'sham' or 'tax avoidance'. It gave illustrations i.e. corporation has been structured for circular trading or round tripping or to give bribes. It is submitted that there is no basis to allege that there is either any circular trading or round tripping or even giving bribes. 27.16 One of the basis which led the learned DRP to hold that the transaction is sham is based on the assumption that shares were issued by NDTV Network International B V", to "Universal Studio International B V" at a premium of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of judicial scrutiny. It has been not shown that either no funds came or it was the assessee's own funds by leading positive material. The conclusion is based on frivolous, unsubstantiated allegation that, it was assessee's own money. 28.1 It is submitted that the basis on which A.O. has proceeded to make addition u/s 69A of the Income Tax Act is that, investment is not recorded in the books of accounts; whereas it has been held by the authorities that the investment is duly recorded in the books of the assessee's subsidiary M/s NDTV Networks International Holdings BV and therefore by no logic it could be held that provisions of section 69A of the Act are applicable. It is added here that the learned DRP in its order has held that the addition is to be made u/s 69A of the Act. It has also held that, addition is to be made u/s 68 of the Act. This finding itself shows contradiction in terms. Even assuming for an argument that section 68 of the Act has been invoked, and has been invoked then the fact remains that there is a credit in the books of the assessee subsidiary, the source of which is well established that the funds have been received through banking channel and has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant that it would not be material in order to invoke the provisions of section 68 or 69A of the Act. 28.4 It is submitted the other factor which has made basis by the revenue is that, such shares were offloaded by the said company at a lower premium is also misconceived, as would be evident from Annexure 2 to this Synopsis. 28.5 It is submitted that in the judgment of the High Court in the case of CIT vs. Divine Leasing & Finance Ltd. reported in 299 ITR 268 (Del) which has been upheld by the Apex Court in the case of CIT vs. Lovely Exports Pvt. Ltd. reported in 319 ITR 5 (ST), it was held that where there was an investment by way of share capital, no addition can be made in the hands of investee company. The only requirement is to establish the identification of the shareholder. In this case, it is submitted there is no whisper or suggestion that, assessee had failed to establish the existence of the said company. On the contrary, it is an admitted fact that the said company exists and was a group company of NBCU, which is one of the largest media entertainment company and is a part of GE company. There is no allegation by any of the companies that, they did not make investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rates, which it is submitted is of no consequence at all.The appellant seeks to place reliance on the following judgments: i) 350 ITR 220 (All) CIT vs. Jay Dee Securities and Finance Ltd. ii) 91 DTR 217 (All) CIT vs. Misra Preservers (P) Ltd. 29.2 At this juncture, the appellant submits the finding of the learned Assessing Officer in the remand report was that the transactions involved round tripping (page 140 of the Appeal Set). However, the learned DRP finding that such an observation is unsubstantiated has held in its direction (page 146 of the Appeal Set) that "though the assessee has sought to explain the above amount through the lengthy and circuitous transactions, the commercial substance/economic rationale for such transaction has not been satisfactorily explained. 29.3 The appellant most respectfully submits that the aforesaid observations of the learned DRP are not merely flimsy and vague but are in disregard of the fact that explanation tendered could not be by any stretch of logic or imagination or the transaction was circuitous or otherwise lacking commercial substance/economic rationale. On the contrary, the appellant company had established that such a tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly vague and unsubstantiated. It was for the learned DRP to establish and not allege on subjective suppositions that the transaction lacks commercial substance or economic rationale. The learned DRP has failed to comprehend that there is exists, no material to arrive at such a finding or conclusion. Infact, there had been no examination of the parent company or investor company or even books of accounts to suggest that explanation of the appellant overlooks commercial substance. On the contrary, the assessee received valid consideration after due negotiation when it issued shares to the investor company. It is a matter of record that such issue of shares was based on valuations, which had been accepted by other investors and are not in dispute in the instant appeal and thus, the entire approach of the learned DRP to direct the learned Assessing Officer to make the addition is based on unsound principles and complete misconception of facts and circumstances of the case of the appellant company. 29.6 Further, even the observation that economic rationale has not been explained is also vague but is contrary to fact that the assessee has received an amount which is not an astronomica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution of capital and the manner in which it had to be classified. The said fact has also been accepted by the Ld. AO in his remand report at Para No. 2.3.11.1. Thus, the issue whether the shares could be issued on premium or not cannot be a test to determine the characterization of the transaction in the present case. 30.3 To support that the issuance of share premium without having valuation done have no consequence, the Applicant placed its reliance on the ruling of the Mumbai Tribunal in the case of M/s. Green Infra Ltd vs ITO reported n 159 TTJ 728 wherein the newly incorporated company issued shares of ₹ 10 at share premium of ₹ 490, though it had yet to start its business. The relevant extracts of the above case are as under:- ''....During the course of the assessment proceedings, the AO sought details and information u/s. 133(6) of the Act from the subscribers to the share capital and share premium account. The necessary details and explanations were received and were duly placed on record. After considering the entire submissions and the documents filed by the assessee in response to the specific queries raised by the AO, the AO was of the firm belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish various particulars which have been set out in pages 21-23 of the paper book and contained in about 10 columns. He also proceeded to make further enquiry to that end and issued notices under Section 133 (6) of the Income Tax Act, 1961 to the individuals and entities who had applied as shareholders directly. This yielded certain information. 28 of the 39 investors responded to the queries. Out of the balance of 11, 2 of them did not receive the notice and 9 received the notices and apparently had responded. Based on the materials on record, the AO framed the assessment adding the entire amount under Section 68. The assessee claiming to be aggrieved approached the Commissioner (Appeals) and successfully argued that once the identity of the investors had been disclosed, it had discharged the burden imposed upon it by law and that the amount could not be added back under Section 68. The Commissioner of Income Tax (Appeals) directed the deletion of ₹ 1.10 crores holding that since these individuals had responded and furnished the particulars elicited, the AO should not have added the amount as income. Almost similar approach was adopted in respect of the other 11 investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approached by the AO to afford any reasonable explanation as to how they got the amounts given the nature of their income which was disproportionally less than what they subscribed as share capital would also amount to the Revenue having discharged the onus if at all which fell upon it. This Court also notices that the assessee in this case was incorporated barely few months before the commencement of the assessment year, and there is no further information, or anything to indicate why its mark up of the share premium thousand folds in respect of the shares which were of the face value of ₹ 10 lakhs was justified. 9. In view of the above discussion, this Court is of the opinion that the Revenue's appeal has to be partly allowed. 10. The impugned order is accordingly set aside to the extent it deleted the addition of ₹ 31,94,000/-. The said amount is directed to be restored and added back to the assessee's income under Section 68. 11. The appeal is partly allowed to the above extent." The said judgment support the submission of the appellant where a shareholder confirms the investment made in acquisition of shares despite the fact that shares were issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted the lifting of corporate veil or would be held 'cash credits' under section 68 of the Act or 'unexplained money' under section 69A of the Act in the hands of the assessee company. s far as the losses in the hands of the investor (USBV) on account of subsequent repurchase is concerned, the same is also irrelevant as it is not the case of the Revenue that such losses have benefited the assesee or its group companies in any manner. On the contrary, presuming but not admitting that the losses so incurred by the investor (USBV) are not genuine in that case also the appropriate recourse would be non allowance of such losses, if it is claimed in the hands of the investor (USBV) and in no manner could make the "good money" as "bad money" received on subscription of shares under section 68 or 69A of the Act in the hands of assessee or its group companies. 30.7 Having said so, the decision of USBV/NBCU to exit from the company M/s NNIH was based on the fact that entertainment business in India was based on the reasons that the business of NDTV Imagine Group has suffered huge losses and to revive the same the fresh equity infusion was required. It is a fact that the entire business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in view of the following decisions: i) 26 ITR 775 (SC) Dhakeswari Cotton Mills Ltd. vs. CIT "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income- tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3).'' ii) 37ITR 271 (SC) Umacharan Shaw & Bros. vs. CIT "...Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters." 31 The assessee also seeks t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be made in the hands of assessee company by invoking these sections. i) That the Company had complied with all Accounting Standards in accordance with provisions of the Companies Act, 1956 while preparing the accounts for the year under consideration and the Ld. AO is factually and legally incorrect in alleging that there is non-compliance of Accounting Standards. ii) That the Company had disclosed the true nature of above transaction in its consolidated books of accounts / financial statements which is clearly evident from the disclosures made in the notes of accounts and had even explained the objective and rationale of the said transaction in the Annual Report for the year under consideration. Therefore, the Ld. AO is factually incorrect and wrong in stating that the applicant had failed to disclose the true nature of the above transaction. iii) The AO had alleged that the applicant company failed to prove the identity and creditworthiness of the share subscriber and also failed to satisfactorily prove the nature and the source of the funds. In respect of the above allegations, though the applicant had discharged its primary onus to prove the identity and creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit worthiness of shareholders.; and iii) Genuineness of transaction 34 Apart from the above the applicant submits that invoking of provisions of section 68 and 69A of the Act on the same amount, itself shows complete non application of mind by the Ld. AO/DRP. The applicant is saying so as the provisions of section 68 and 69A of the Act are parallel to each other, and basic ingredients of these two sections are opposite to each other as stated below: Section 68 of the Act Section 69A of the Act Conditions for applicability of section 68 of the Act:- Conditions for applicability of section 68 of the Act:- • The existence of the books maintained by the assesee himself, and • assessee is found to be owner of any money, bullion, jewellery or Other valuable article; • A credit entry in the books of account and Such money, bullion, jewellery or valuable articleis not recorded in the books of account, if any, maintained by the assessee for any source of income 34.1 From the above highlighted portion above, it is clear that if the there is a credit entry in the books of accounts which is not satisfactorily explained that would be covered in section 68 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed fact that the amount in question was the money received by the subsidiary of the Applicant company who would be treated 34.7 In addition to above, the acceptance of the Ld. DRP/AO in their respective orders that the share capital was subsequently re-purchased by the another subsidiary assessee of company from the erstwhile investor later on also shows and support that at no point of time the assesee or its any subsidiary was the owner of the said share capital. On the contrary, it is proven by the material on record and admission by the Ld. AO/DRP that investment was made by section 69A of the Act could not be invoked in the facts of the case. 34.8 A company is a separate legal person and the fact that all its shares are owned by one person or by its parent company has nothing to do with its separate legal existence. If the owned company is wound up, the liquidator, and not the parent company, would get hold of the assets of the subsidiary and the assets of the subsidiary would in no circumstance be held to be those of the parent. Even though a subsidiary company may normally comply with the request of the parent company, it is not a mere puppet of the parent. The disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not generally imply that the subsidiaries are to be deemed residents of the State in which the parent company resides. In other words, the Supreme Court recognises the separate existence of the holding company and its subsidiary companies for tax purposes. 34.11 The second condition which needs to be satisfied cumulatively with the first condition is "the said money has not been recorded in the books of account of the assessee". It is a fact that the money in question is duly recorded in the books of NNIH, therefore, this condition is also not satisfied in the present case. Therefore, the provisions of section 69A of the Act have no application in the present case. 34.12 The applicant further submits that the intention of the legislature behind section 69A of the Act is to tax the money not recorded in the books of accounts of the assessee though the assessee is the owner of such money. Such provisions would normally get invoked in cases where in the assessee is found to be owner of money and valuable article which he failed to record in its books. However, it could not be invoked in a situation where the money has been duly reported and had been recorded in the correct books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Networks business. The Group has raised US$ 150 million from NBCU for an effective stake of 26% in NDTV Networks Plc. The NDTV - NBCU strategic partnership was a coming together of two leading professional organizations with similar ethics and goals with a promise to be a major force in the media scene in India and beyond. 34.18 NBCU as a strategic partner infused the fresh capital on issuance of new shares. Thus, it is evident that nature of the said transaction is infusion of the share capital which is evident and supported by the Share Subscription and Shareholder Agreement dated May 23, 2008. The legal sanctity of the said documents could not be displaced on surmises and conjectures as alleged in the impugned assessment order. 34.19 In respect of the identity of NBCU and USBV, it has already been submitted that NBCU, now a part of Comcast Corporation (GE Venture), is one of the world's leading media and entertainment companies in the development, production, and marketing of entertainment, news, and information to a global audience. NBC Universal owns and operates a valuable portfolio of news and entertainment television networks, a premier motion picture company, signifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twork International Holding BV, were having a face value of around $1 per share, equivalent to ₹ 40 to 50/- per share approx. at the relevant time and that the rate at which the shares were subscribed comes to ₹ 7015.05 per share." 34.23 He has further stated that, it is an undisputed fact that, -no independent valuation at all was ever carried out by the group companies or by the NBCU i.e. Investor company and the issue rate as well as was the repurchase rate are claimed to be solely based on estimates and business projections." He has further stated that, it is an undisputed fact that, during the immediately succeeding F.Y. 2009-10, relevant to A.Y. 2010-11, the very same shares were bought back by NDTV BV, a subsidiary of NDTV, for ₹ 58.08 crores @ ₹ 634.17 per share. On the aforesaid basis he called upon the assessee, why such transaction may not be proposed to be treated as sham and the amount be not proposed to be added as its taxable income. It is thus apparent, the fundamental basis for making the addition as has been stated by the learned DCIT in his order at page 124 para 2.3.9 was that the shares were subscribed by the group companies or by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded in the books of accounts. 34.27 The learned A.O. thereafter at page 125 in para 2.3.10.1 has recorded that, the additional evidence furnished by the assessee in response to his notice establishing the genuineness of the transaction the identity of the payer i.e. the subscriber of the shares, creditworthiness has discharged when it had furnished the following evidences: (i) Copy of Share Subscription Agreement dated 23.05.2008 and Share Certificate. (ii) Copies of Annual Reports of NBCU for FYs. 2008 to 2010 filed before Securities Exchange Commission, US. (iii) Copy of Annual Report of NDTV for F.Y. 2009-10. (iv) Copy of Annual Report of GE. (v) Copy of Form 10K filed by the Comcast Corporation before US Securities and Exchange Commission. (vi) Copy of bank account of NNIH in ING Bank, Netherlands. (vii) Copy of Audited Accounts of NNIH. 34.28 It is submitted that, despite the aforesaid evidence the learned A.O. in his order at page 125, para 2.3.10.3 has observed that, "no confirmation from NBCU regarding the transaction has been filed at all." It is respectfully submitted that, the aforesaid observation of the learned A.O. has factually incorrect as it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price and then repurchased the same at a lower rate without there being any valuation made both at the time of purchase and sale, it is respectfully submitted is highly misconceived. At the first instance, it is submitted the same is absolutely no test in the eyes of law as the Apex Court has held in the case of CIT vs. Lovely Exports Ltd (Supra). that, when a subscription is received by the company from its shareholder, the amount of share subscription cannot be assessed in the hands of the company so long it establishes the identity of the shareholder. In the instant case, it is respectfully submitted that, the learned A.O. has failed to comprehend that, under Article 141 of the Constitution of India, he is bound by the said judgment and any further probe is highly unwarranted and is beyond jurisdiction. The Apex Court has nowhere held that, where shares have been subscribed at a higher value than the face value, in such cases, an amount received by the company by way of share subscription can be added to the income of the company so long it establishes the identity. In the instant case, it is neither an allegation nor is the finding that the subscriber of the shares has not esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingenuine" is not a matter of mere discretion but has to be arrived at a consideration of all such evidence, which are relevant to the determination. In the instant case despite AO's own finding, he ignored such a foundational evidence, which in his opinion would have clinched the issue. At this stage, there was so done, as he had a fear in his mind, he will face the wrath of Shri S. K. Srivastava. Infact Hon'ble High Court of Delhi in the case of P. K. Misra Ex. IRS and CIT had made an adverse inference based against the role of Shri S. K. Srivastava. 35.2 Apart from the above, a finding to hold a transaction as "sham" cannot be reached, merely because on giving such a finding a higher revenue can be generated. Infact, something more than, the mere yielding of revenue is required is necessary and by establishing that the purported transaction was merely a paper transaction and was neither intended to be acted nor in fact it was acted and was a mere paper transaction, as against a transaction where such a transaction had factually been undertaken not on papers but has also been implemented in letter and spirit too. Further it has to be established that the parties to the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Snook vs. London and West Riding Investment reported in 1967 2Q.B. 786 has held that, " I apprehend that, if it has any meaning in law, it means acts done, or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create". Further Hon'ble Bombay High Court in the case of CIT vs. Seksaria Sons Pvt. Ltd. reported in 138ITR 419 at page 424 has held that a transaction without substance can be regarded as 'sham'. But a transaction brought in existence for ulterior purpose does not necessarily become a sham transaction. The Apex Court in the case of Sree Meenakshi Mills Ltd. reported in 31 ITR 28 had held that, to establish the transaction to be sham, the relevant consideration is whether such a transaction in fact did or did not take place in reality. In otherwords a transaction can be held to be a sham transaction which was not intended to be operative and was merely a cloak to conceal a different transaction. A list of few more cases on this issue are stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "shammer" affect the rights of a party whom he deceived 35.5 In the instant case, by no stretch of imagination, it can be alleged that the assessee's subsidiary did not issue the shares or the subscriber to the share capital which acquired 26% indirect stake in NNPLC did not make any investment in the subsidiary of appellant 35.6 It is submitted there is no denying of the fact that such subscriber contributed the consideration from its own funds and it was duly recorded in their books of accounts. There is no evidence in rebuttal which has been brought on record to establish that any such consideration which was contributed by the share capital came from the sources of the appellant company. Thus the sources of consideration for acquiring the shares came from the resources of the investors and appellant's subsidiary or appellant had at no stage contributed the said sum. The allegation of the revenue is based on assumption, and no evidence has been brought on record to show the value of said shares was otherwise, than at which it had been acquired. It is submitted the value of the said shares at which the shareholder had agreed to make investment was not a price at whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Malayalam Plantations Ltd. ii) 65 ITR 381 (SC) CIT v. Walchand & Co. etc iii) 72 ITR 612 (SC) J K Woollen Manufacturers v. CIT: iv) 82 ITR 166 (SC) CIT v. Birla Cotton Spg. And Wvg. Mills Ltd. v) 288 ITR 1 (SC) S.A. Builders Ltd. vs. CIT vi) 331 ITR 502 (Del) CIT vs. Bharti Televentures Ltd vii) 155 Taxmann 268 (Bom) CIT vs. Padmani Packaging (P) Ltd. viii) 331 ITR 401 (P&H) (FB) CIT v. Rockman Cycle Industries Ltd ix) ITA No. 1068/2011 & 1070/2011 (Del HC) CIT vs. EKL Appliances Ltd x) 254 ITR 377 (Del) CIT v. Dalmia Cement (P.) Ltd: 35.8 It is submitted that the learned Assessing Officer in the order of assessment has stated that, no confirmation from NBCU was filed and had the same was filed it is obvious as he states he could have made an enquiry to verify after calling upon the assessee to furnish their affidavit, the purpose to making the investment. 35.40 It is submitted that, on both the aforesaid grounds, the revenue is factually incorrect. Firstly, the evidence was furnished before the DRP only when it was called upon to do so that the value of the shares was based on commercial consideration and was arrived at on the basis of proper working. This submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered into by the assessee coupled with the above creation of the subsidiaries and their liquidation and merger along with the money trail shows that the transaction is sham. 86. He further submitted that confirmation was filed by the assessee only in December 2013 when there was no time limit available for verification by the Assessing Officer. He further submitted that assessee has stalled the whole process of examining the evidences by not furnishing the evidences which are required. He referred to the agreement of sale and purchase of share to show that a company who has invested US$150 million has made no valuation at the time of investment, no due diligence but within a very short time has exited by selling those shares at US$12 million by incurring huge loss of US$138 million. He further submitted that the investment was made on this date 23.05.2008 and sold on this date 14.10.2009. He therefore, stated that above structure and the transactions were created in such a manner that it does not catch eye of the Revenue. He submitted that the whole series of events of forming of the subsidiaries and their merger or liquidation is done for the sole purpose of evading tax on ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not locate the exact source. On that basis, he submitted that income has been correctly taxed in the hands of the assessee. 88. Ld DR also filed an application dated 05.07.2017 for admission of additional evidence in the form of I. show-cause notice dated 15.06.2016 issued u/s 271(1)(c) of the Act for the same Assessment Year and II. application dated 13.05.2016 filed by the assessee for compounding of contraventions under FEMA 1999. The application for admission of the additional evidences raised the following contentions:- 1. That against the returned income declaring loss of ₹ 64,83,91,422/- for AY 2009-10 filed by the assessee on 30.09.2009, draft assessment order was passed by the AO on 31.03.2013 under section 144 after detailed discussion in the order, however, in column 11 of the table at 1st page of the order, due to typographical mistake, it was typed as 143(3)/144C(1) and the income of the assessee was proposed to be assessed at f641,08,11,990./- as against loss of f64,83,91,422/- declared by the assessee in its return of income. 2. The assessee filed objections before the Dispute Resolution Panel ("DRP") and the DRP issued directions dated 31.12.2013 under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, which are relevant to the matter before the Honble Tribunal. 8. That the above documents are sought to be filed as additional evidence before the Honble Tribunal, as the same have a vital bearing for adjudication of matter before the Honble Tribunal. 9. That the documents sought to be filed could not be filed earlier, because it is the case of revenue that this Honble Tribunal does not have the jurisdiction to entertain the assessee's appeal and hence, filing of application for additional evidence could be construed as admission of jurisdiction of the Honble Tribunal with respect to the assesse's appeal. 10. In view of the above, it is humbly prayed that the said documents may kindly be permitted to be filed as additional evidence." 89. The contention of the revenue for the admission of the additional grounds was that after passing the final assessment order on 21.02.2014 u/s 144 of the Act the penalty proceedings u/s 271(1)(c) of the Act were initiated and during the penalty proceedings certain vital facts have come to the knowledge of the revenue which have direct bearing on the issue involved in this appeal. He submitted that the documents were sought to be filed now co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of contraventions under FEMA 199 section 15 Foreign Exchange (Compounding Proceedings) Rules, 2000- Compounding application filed by appellant 58 - 65 iv) Application dated 13.5.2016 by NDTV For compounding of contraventions under 66 - 80 2 It is submitted that, Rule 29 of the ITAT Rules' 1962 when is read closely, it would be seen that the Rule has negatively been worded and mandates that, ITAT shall not admit additional evidence and thus, neither parties can lead additional evidence. However, it further provides i.e. the second that, additional evidence be admitted if ITAT requires any document to be produced. In the instant case, it is submitted the aforesaid evidence as tendered as has been 'required' to be produced by the Hon'ble Tribunal. The only other requirement is -for any substantial cause" if the said -substantial cause" is read with operative provision, then such evidence can only be admitted when no opportunity has been granted to the assessee. Thus it is only where an assessee complains that there has been lack of opportunity such evidence can be either produced or is admitted and not otherwise. Under the Rules the revenue is not permitted to adduce any fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of para 1 of the application are incorrect. It is submitted that there is no material to show that in column 11 at page 1 of the draft order dated 31.3.2013, it was typographically typed as 143(3)/144C instead as 144 of the Act. In fact it is contrary to the forwarding letter dated 31.03.2013 (Page 178A of a compendium of documents filed on 03.07.2017) 3.1 On the contrary reading of the draft order of assessment, would show that the said draft order was prepared u/s 143(3) of the Act. It is submitted that jurisdiction to frame order u/s 144 of the Act was confined to compute income in view of section 145(3) of the Act which too was based on misconception. The detailed submissions made are at pages 193 - 197 and further in the compendium of documents filed on 03.07.2017 at pages 69 - 80, a copy which was separately furnished. The appellant had referred to the judgment of Privy Council in 6 ITR 414 in the case of KhemChand Ram Das. 4 The contents of paras 2 to 5 of the application are factual and therefore need no rebuttal with the submission that in para 4, it is incorrectly stated that the assessment has been framed u/s 144 read with section 144C(13) as the draft was prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that appellant either is the "ownef of money or the share subscription/capital account transaction between two independent existing genuine entities through banking channels which is duly disclosed is not a "genuine" transaction. 8 Likewise compounding under FEMA further establishes the genuineness of transaction and not otherwise. 9 It is thus submitted that looking from any angle no addition is warranted of ₹ 642,54,22,000/- u/s 69A of the Act and, also the additional evidence as furnished does not warrant admission under Rule 29 of the ITAT Rules." 91. The ld AR further submitted that Revenue does not have any authority for adducing any fresh evidence. He relied upon the decision of Hon'ble Rajasthan High Court in CIT Vs. Rao Raja Hanuat Singh 252 ITR 528 and the decision of the Hon'ble Supreme Court in Mahavir Singh Vs. Naresh Chander AIR 2001 SC 134. He further objected that after conclusion of the argument by assessee the revenue cannot make request for admission of additional evidence. It should have been made only before commencement of the hearing. He further submitted that show cause notice is based on the statement of Mr. Sanjay Dutt who was not granted cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor who is at helm of all the proceedings of income tax , assessee is making a mockery of judicial process. The assessee has also accepted the above stay order and now therefore, cannot question the directions of the tribunal. It was further submitted that revenue is ready to grant the opportunity of cross-examination to the assessee of any of the persons whose statement including the director of the company were recorded as soon as the appeals in quantum proceedings are decided. Regarding the request for admission at the time of commencement of argument he submitted that though it cannot be a rule and neither there is a law but still the above additional evidences are submitted in response to the arguments of the counsel of the assessee. He further submitted that the arguments are not concluded yet and hopefully assessee has full chance to rebut those evidences in the rejoinder. He further referred to Rule 29 of the ITAT Rules to state that there is no bar in adducing the additional evidences by the Revenue. 94. We have carefully considered the rival contentions. The rule 29 of the ITAT Rules provides thatProduction of additional evidence before the Tribunal. 29. The parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry. He submitted that the said additional evidence merely supports the case of the revenue further and thus, would be of help to enable the Tribunal to adjudicate the issue relating to PE involved in the present appeal. 10. The learned counsel for the assessee, on the other hand, raised a strong objection for entertaining the application n moved by the Department under rule 29 for admission of the additional evidence. He contended that as per Rule 29, there is a complete bar for the revenue to furnish any additional evidence unless it is so required by the Tribunal. In this regard, he submitted that no additional or fresh evidence can be furnished by the revenue in an appeal filed by the assessee before the Tribunal as per the mandate of Rule 29 and only the assessee alone can be allowed to adduce additional evidence provided that he establishes before the Tribunal that his case has been decided without giving sufficient opportunity to him by the authorities below and the Tribunal is satisfied on this aspect for the reasons to be recorded in writing. He submitted that the Tribunal, no doubt, has the discretion to allow the production of fresh evidence if it requires the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue diligence; and (c) Where the appellate court required the additional evidence so as to enable it to pronounce better judgment or for any other substantial cause of like nature. He contended that none of the aforesaid conditions, however, is satisfied in the present case so as to warrant the admission of additional evidence even under Rule 27 of Order 41 of CPC much less under Rule 29 of the Appellate Tribunal Rules which specifically prohibits the revenue from producing such additional evidence. 14. The learned counsel for the assessee also argued that the discretion given to the appellate authority i.e., Tribunal to allow the production of additional evidence is strictly circumscribed by the limitations specified in the aforesaid Rule and the said Rule is not intended to enable a party to patch up the weak points of his case as held in the case of Muneswari v. Jugal Mohini AIR 1952 (Cal.) 368 and in the case of N. Kamalam v. Ayyasamy [2001] 7 SCC 503 at page 514. He also relied on the decision of Hon'ble Punjab & Haryana High Court in the case of Gram Panchayat, Kanehi, Tehsil & District Gurgaon v. Ram Kumar [2001] (2) Punj. LR 186 to contend that the additional evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Corporation of Greater Bombay v. Lala Panchan AIR 1965 SC 1008. (iii) Gurudev Singh v. Mehnga Ram [1997] 6 SCC 507. (iv) Arjan Singh v. Kartar Singh AIR 1951 SC 193. (v) Natha Singh v. Financial Commissioner, Taxation AIR 1976 SC 1053. (vi) Krishna Reddi v. Ramireddi AIR 1954 Mad. 848. (vii) Smt. Girijamma v. Kamala Engg. Works AIR 2000 (Kar.) 239. (viii) Mandala Madhava Rao v. Mandala Yodagiri AIR 2001 AP 407. (ix) CIT v. Motilal Hirabhai Spg. & Wvg. Co. Ltd. [1978] 113 ITR 173 (Guj.). (x) Charbhai Biri Works v. Asstt. CIT [2003] 87 ITD 189 (Pune)(TM). (xi) CIT v. Smt. Kamal C. Mehboobbani [1995] 214 ITR 15 1 (Bom.). 18. The learned CIT-DR contended that the Tribunal may refuse to admit additional evidence raised before it by any of the parties only if the said evidence lead to investigation into fresh facts or the same was within the knowledge of the party and could have been produced earlier. He also contended that the additional evidence being sought to be produced by the revenue in the present case, however, does not lead to investigation into fresh facts and the same having been come to the knowledge and possession of the Department only during the course of sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal is vested with requisite authority and jurisdiction to admit additional evidence and material in order to do substantial justice between the parties. He submitted that to the similar effect are the decisions of Hon'ble Delhi High Court in the case of R. Dalmia v. CIT [1978] 113 ITR 522 and that of Hon'ble Bombay High Court in the case of Smt. Suhasinibai Goenka v. CIT [1995] 216 ITR 5183 which fully support the application moved by the revenue for admission of additional evidence. 20. Reliance was also placed by the learned CIT-DR on the decision of Hon'ble Calcutta High Court in the case of ITO v. B.N. Bhattacharya [1978] 112 ITR 423 wherein it was held that appel- late courts have power to allow additional evidence not only if they require such evidence "to enable it to pronounce judgment" but also for "any other substantial cause". Further reliance was also placed on the decision of Hon'ble Madras High Court in the case of R.S.S. Shanmugam Pillai & Sons v. CIT [1974] 95 ITR 109, wherein it was held that if the Tribunal finds that the documents filed are quite relevant for the purpose of deciding the issue before it, it would be well within its powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Courts in both these cases shows that it was nowhere laid down that there is a complete bar for the revenue to seek admission of additional evidence as sought to be contended by the learned counsel for the assessee before us. 22. For instance, in the case of Rao Raja Hanut Singh (supra), the assessee was a renowned international polo player and a distinguished sportsman. He frequently used to visit Britain especially during the polo session and had bank accounts in Britain throughout the relevant period. He received certain payments in the said bank accounts from companies and the said amounts had been utilized by him for meeting his expenses. The assessee claimed that the amounts so deposited in his bank accounts were not any consideration on remuneration but only for reimbursement of expenditure incurred by him in UK. This claim of the assessee, however, was negated by the Assessing Officer and entire deposits were included by him in the taxable income of the assessee. On appeal, the Appellate Asstt. Commissioner, however, deleted the said additions. The revenue appealed to the Tribunal and moved an application for permission to produce additional evidence to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence provided the same enables it to pass orders or for any substantial cause. It is pertinent to note here the expression used by the Hon'ble Rajasthan High Court in this context is "parties" which includes the Department also in its capacity as appellant or respondent. 23. Similarly, in the case of Smt. Kamal C. Mabhoobbani (supra) cited by the learned counsel for the assessee, the facts involved were that the assessee was an individual who declared of having 21 high denomination notes of ₹ 1,000 each totalling to ₹ 21,000. Her contention of having withdrawn the equivalent amounts of lower denomination notes from her bank account and kept the same at home before converting into high denomi- nation notes through a family friend was not found acceptable by the Assessing Officer on scrutiny of her passbook. He, there- fore, treated the amount of ₹ 21,000 as income of the assessee from undisclosed sources and added the same to her total income. On appeal, this addition, however, was deleted by the AAC accepting the stand of the assessee. This relief given by the AAC to the assessee was challenged by the revenue in an appeal before the Tribunal and add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of sale was ₹ 2,58,338. The Valuation Officer of the Department estimated the market value of the property sold at ₹ 4,17,000 and adopting the said value under section 52(2), the difference of ₹ 2,76,066 (Rs. 4,17,000 - ₹ 1,40,934 as the cost of acquisition of the properties) was brought to tax by him as capital gains. On appeal, the Appellate Assistant Commissioner held that it was not established that anything more than the disclosed consideration had been received by the assessee and accord- ingly, he directed the ITO to recompute the capital gain taking the sale consideration at ₹ 2,58,338. On appeal to the Tribunal by the Department, it was contended that the provisions of section 52(2) were clearly applicable and reliance in support of this contention was placed on certain affidavits given by the concerned purchasers affirming therein on oath that the sale consideration received by them was actually more than what was shown in the document. The said affidavits were sought to be produced by the revenue as additional evidence before the Tribunal which was objected by the assessee on the ground that the said affidavits were available at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s explanation on the additional evidence and also to lead any further evidence which he may wish to produce to rebut the said additional evidence. This action of the Tribunal in admitting the additional evidence comprising balance sheets and profit & loss accounts of JT was challenged by the assessee before the Hon'ble High Court submitting that the Tribunal was in error in admitting the said additional evidence at the time of hearing of the appeal. This submission made on behalf of the assessee, however, was found to be devoid of foundation by the Hon'ble Delhi High Court observing that whether to admit the additional evidence or not was in the discretion of the Tribunal and no prejudice was caused to the assessee because the matter was remitted to the AAC for affording an opportunity to the assessee to explain the said additional evidence as well as for recording such further evidence as the assessee might wish to offer. 27. Even in the case of B.N. Bhattacharya (supra) cited by the learned CIT-DR, the production of the record of the process server by the Department at the first time before the Hon'ble Calcutta High Court during the course of hearing was strongly objected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and admitting the same, the issue relating to change of previous year under the Income-tax Act was decided by the Tribunal against the assessee relying thereon. When this decision of the Tribunal was challenged by the assessee, Hon'ble Kerala High Court upheld the action of the Tribunal in admitting the additional evidence filed by the Department. However, keeping in view the facts of the case, it was held by the Hon'ble Kerala High Court that while deciding the appeal of the assessee, proper procedure was not followed by the Tribunal in the sense that the matter should have been remanded by it to the Assessing Officer. 29. Keeping in view the aforesaid decisions of various High Courts cited by the learned CIT-DR which were decided after taking into consideration Rule 29 of the Appellate Tribunal Rules, we find it difficult to accept the contention of the learned counsel for the assessee that there is a complete bar for the revenue to produce any additional evidence suo motu and it can be permit- ted to do so only if the Tribunal requires such evidence and accordingly directs the Department to produce the same. In our opinion, the first limb of condition stipulated in rule 29 cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial cause. It was also clarified that the expression "to enable it to pronounce judgment" contemplates a situation when the appellate court finds itself unable to pronounce judgment owing to a lacuna or defect in the evidence as it stands. In this context, it was further clarified that the ability to pronounce a judgment is to be understood as the ability to pronounce a judgment satisfactory to the mind of court delivering it. This position was reiterated again by the Hon'ble Supreme Court in the case of Syed Abdul Khader v. Rami Reddy AIR 1979 SC 553 cited by the learned counsel for the assessee. In the case of Municipal Corporation of Greater Bombay v. Lala Panchan AIR 1965 SC 1008 cited by the learned counsel for the assessee, it was observed by the Hon'ble Supreme Court that the power to admit additional evidence does not entitle the appellate court to let in fresh evidence only for the purpose of pronouncing judgment in a particular way and it is only for removing a lacuna in the evidence that the appellate court is empowered to admit additional evidence. In the case of Arjan Singh v. Kartar Singh AIR 1951 SC 193, it was held that the discretion given to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1968] 68 ITR 708, when the evidence was available to the party at the initial stage and had not been produced by him, the mere fact that evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage. The admissibility of additional evidence depends on whether or not the Tribunal requires it to enable it to pass orders or for any other substantial cause and not to enable the assessee or the Department to tender fresh evidence to support a new point or to make out a new case. In the case of N. Kamalam (supra) it was held that the provisions of Rule 27, of Order 41 of Civil Procedure Code, 1908 are not designed to help parties to patch up weak points and make up for omissions earlier made. 32. In the case of Smt. Girijamma v. Kamala Engg. Works AIR 2000 Kar. 239, it was held that when there was a failure on the part of the applicant to produce the documentary evidence during trial in spite of having knowledge as to its existence, he could not be permitted to adduce the same as additional evidence in appeal. This position has been reiterated in the case of Mandala Madhava Rao v. Mandala Yodagiri AIR 2001 AP 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd authenticity of such documents and to adjudicate the matter afresh after providing adequate opportunity to the assessee of being heard. 34. Keeping in view the legal position as regards the matter of admission of additional evidence by the appellate authority as emanating from the various judicial pronouncements discussed above, we can now endeavour to examine the various documents being sought to be filed by the revenue in the present case as additional evidence by appreciating and ascertaining their relevancy as well as requirement to adjudicate upon the issue in dispute in the present appeal or for any other substantial cause in terms of Rule 29 of the Appellate Tribunal Rules, 1963. The above evidences were not in possession of revenue at the time of passing of the original order or before ld DRP but have been collected during the course of penalty proceedings and also after filing of the appeal by the assessee. In fact the additional evidences are two statements of different persons one of them is the director of the company and second is also of the close associate of the assessee. The close associates of the assessee have produced certain copies of emails where he is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any justifiable reason. All these evidences go to rot of the matter. If we do not admit these evidence which are so vital that they clearly speaks about the mind of the persons to achieve ultimate objective and what is to be disclosed selectively to whom and in what matter so the user of such communication is not able to reach at the intent and purposes of the transaction. Therefore, there is just cause for admission of these additional evidences for deciding the issue. Regarding the issue of crossexamination of Mr. Sanjay Dutt we fully agree that no cross-examination was granted to the assessee and therefore, it cannot be used against the assessee. However, with respect to the various mails referred by the ld AO in the show cause notice replied by the assessee vide letter submitted on 02.11.2016. As per page No. 32 of the reply of the assessee 8 emails exchange were recorded and assessee has not denied the existence of such mail. The assessee has merely requested the ld AO to verify the authenticity and genuineness of such mail. In view of this these email exchanges are not denied or said to be fraudulent by the assessee their evidentiary values cannot be discarded. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le income u/s 69A of the Act."2 The learned counsel for the revenue in support of the aforesaid addition has conceded that he neither disputes the identity of the investor company, namely Universal Studios International BV (hereinafter referred to as "USBV" or alternatively as "investor company") and nor the creditworthiness of the investor company. 2.1 He however submitted that he only disputes the genuineness of the transaction of investment made by the investor company into the investee company so as to contend that the said sum is assessable as income in the hands of the appellant company. 2.2 It is submitted that the aforesaid contention is misconceived both on facts and in law. 2.3 It is well settled law that subscription to "share capital" is in the nature of "capital receipt" and could not be brought to tax even in the hands of the investee company, much less in the hands of appellant company. Reliance is placed on the following judicial pronouncements: i) 192 ITR 287 (Del) CIT vs. Stellar Investment Ltd. approved by the Apex Court in the case of CIT vs. Stellar Investments reported in 251 ITR 263 (SC) ii) 319 ITR 5 (St.) CIT vs. Lovely Exports Pvt. Ltd. iii) 361 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the "ownef of the sums received as share subscription by the NDTV Networks International Holdings BV ("NNIH") from USBV, an independent investor company. 2.8 It is thus respectfully submitted that mere allegation based on an erroneous assumption that the transaction is "non genuine" does not imply statutorily or even otherwise that appellant is "owner3' of money received as share subscription by the subsidiary of the appellant company and, therefore the addition u/s 69A of the Act is perse without jurisdiction. 3 The revenue instead of discharging the aforesaid burden u/s 69A of the Act to show that appellant is "owner3' of money by leading any valid evidence has attempted to side track the aforesaid issue by essentially making two fold submissions: a) That there is no burden on the revenue to locate the source of income and reliance has been placed on two judgments of Apex Court in the case of A. Govindarajulu Mudaliar v. CIT reported in 34 ITR 807 and CIT v. M. Ganapathi Mudaliar reported in 53 ITR 623; b) That since the structure is complex and the subscription is at a huge premium (which is not explained through any valuation) and there has been winding up of the structur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ription agreement date May 23, 2008 vi) 24.10.20 13 Share issue Deed dated 23.5.2008 670 673 43A - 43D Evidencing that shares were issued on receipt of share capital of USD 150 Mn. vii) 24.10.20 13 Bank certificate from BNP Paribus evidencing payment of USD 150 million 674 675 44-45 Bank certificate evidencing the bank account from which the subscription money of USD 150 Mn. was paid by USB V viii) 24.12.20 13 Apostilled copy of confirmatio n from Universal Studios Internationa l BV 722 725 89-92 Legally executed documents evidencing the identity, genuineness of nature of transaction and credit worthiness of USBV (investor in NNIH) ix) 24.10.20 13 Annual report of Universal Studios Internationa l BV 676 718 46-88 Evidence related to investment made in NNIH of USBV in its audited accounts x) 29.4.201 3 Annual report of GE 379 502 23-24 Evidencing that NBCU is part of GE group, one of the largest global business conglomerate whose identity, creditworthiness could not be doubted xi) 29.4.201 3 Form 10K of Comcast Corp. under S.E. Act of US 503 650 25-27 Comcast was later on the majority shareholder in the business of NBCU which fortifies that its id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings before DRP, the revenue attempted to make any enquiries and thus in absence of enquiries; adverse inference drawn is highly untenable. 4.5 It was contended at the time of hearing that in the course of assessment proceedings before the draft was prepared on 31.03.2013 the assessee had filed no confirmation from the investee company. The contention is based by overlooking the fact that there was no investment was made by the investee company with the assessee and the AO had made no enquiry whatsoever on the contrary before the ADIT, as submitted the due details as required were furnished and as such there arose no occasion to furnish any such confirmation. The assessee however on 24.10.2013 furnished the confirmation before the DRP, a copy whereof was forwarded by DRP and in the report dated 11.12.2013, the AO never stated that such a confirmation is to be ignored as the same was not apostilled. However the assessee by way of abundant precaution considered appropriate to have the confirmation apostilled and as such was furnished. The submission made by the learned counsel is not only an afterthought but is an attempt to wriggle out from the submissions made by the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted in the instant case it is undisputed that there is no credit in the name of the appellant in the books of NNIH. The credit in the books of NNIH is to account of USB V and therefore even assuming that explanation is not found satisfactorily (though wholly disputed) it does not lead to any conclusion that assessee is the owner of the money received as share subscription by NNIH from USBV. It is thus submitted that the aforesaid judgment has no application to the facts of the case of the appellant company. 6.3 As regards the judgment of Apex Court in the case of M. Ganapathi Mudaliar reported in 53 ITR 623, the revenue has relied on the following observation in the judgment: -Once it is held that 86,500 dollars was the income of the assessee, it was not necessary for the revenue to locate its exact source. On this material, we cannot say that there is no evidence in support of the finding of the Tribunal." 6.4 It will be apparent that In the above judgment It was found as a matter of fact that it was "income" of the assessee and therefore the revenue was not required to locate the exact source of such income. However, there is no such evidence to show that share subscription b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the MOU had been on record during the course of assessment proceedings for assessment year 2008-09 in pursuance to the direction of the learned Assessing Officer. A copy of MOU dated 22.1.2008 alognwith the reply is enclosed at pages 5-20 of PB Volume-VIII. It may be stated here that no adverse inference had ever been drawn on the basis of the aforesaid MOU in order of assessment dated 03.08.2012 u/s 143(3) of the Act. 7.4 The assessee also hastens to add here that there was no direction ever to produce the aforesaid MOU by any of the authorities below during the assessment/DRP proceedings and thus the contention of the learned counsel the same is not on record is firstly factually incorrect and secondly is misconceived as there is nothing in the MOU which is adversely considered. 7.5 Apart from the above it is also stated that the Honble Bench sought copies of list of documents Annexure as Annexure I (page 215 of Paper Book) to the share subscription agreement. The copies of the following agreement as enclosed herewith in compliance to the aforesaid direction of the Honble Bench: i) Amended and Restated TrademarkLicense Agreement between NDTV Parent and NDTV Imagine Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merging Markets Ltd., NDTV Networks PLC and New Delhi Television Ltd. at pages 191-196 of PB Volume- VIII. vi) The General Shared Services Agreement dated 3.3.2008 between NDTV Networks PLC and New Delhi Television Ltd at pages 197-202 of PB Volume-VIII. 7.7 Apart from the above the Honble Bench also specifically directed to place on record the names of nominees of USBV on board of NDTV Networks PLC. 7.8 It is submitted that in pursuance to the aforesaid share subscription agreement and the shareholder agreement following directors were appointed on the board of M/s NDTV Networks PLC: i) Mr. Peter Smith ii) Ms. Roma Khanna 7.9 Further the minutes of the meetings to show effective participation of the investor company in NDTV Networks PLC are also enclosed herewith: Pages of PB Volume VIII i) 8.5.2008 203-222 ii) 16.7.200 223-226 iii) 25.8.200 227-230 iv) 7.11.200 231-234 v) 3.2.2009 235-238 vi) 27.6.200 239-242 vii) 9.7.2009 243-246 viii) 22.9.200 247-252 ix) 16.11.2009 253-256 8 Apart from the above, the learned counsel for the revenue has stated that a reading of the aforesaid agreements shows that there was complete due diligence made by NBCU but the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium of ₹ 490, though it had yet to start its business. The aforesaid decision has been affirmed by the judgment of Honble Bombay High Court in the case of CIT v. Green Infra Ltd. reported in 392 ITR 1. 9.2 Also Hyderabad Tribunal, in ITA No 1775/HYD/2014 in Hariom Concast & Steel (P) Ltd vs ITO, vide judgment dated 05.10.2016 has held that: -8. The other case law relied on by assessee is also on the issue that share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such, evidence was brought on record. On the given facts of the case, and on the basis of the confirmation filed by the companies, we cannot hold that this amount can be brought to tax invoking the provisions of Section 68. The genuineness and credit worthiness of those companies is not in dispute. What AO disputed was the amount of premium. Moreover, if the amounts are doubted from those companies, the amount of share capital at ₹ 10 was not doubted. Only amount of premium was doubted. Therefore the companies' transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased subsequently shows that the original transaction is neither tainted or illegal which warranted the lifting of corporate veil or invocation of under section 69A of the Act in the hands of the assessee company. Reliance is placed on the judgment of Honble Delhi High Court in the case of CIT v. Five Vision Promoters (P) Ltd. reported in 380 ITR 289. ii) As far as the losses in the hands of the investor (USBV) on account of subsequent repurchase is concerned, the same is also irrelevant as it is not the case of the revenue that such losses have benefited the assesee or its group companies in any manner. On the contrary, presuming but not admitting that the losses so incurred by the investor (USBV) are not genuine in that case also the appropriate recourse would be non allowance of such losses, if it is claimed in the hands of the investor (USBV) and in no manner could make the "good money" as -bad money" received on subscription of shares. 10.2 It is also submitted that the decision of USBV/NBCU to exit from the company M/s NNIH was based on the fact that entertainment business in India was based on the reasons that the business of NDTV Imagine Group has suffered huge losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany M/s Universal Studios International BV, who has made investment in acquiring the shares and has so admitted to have made investment. It is thus submitted that the issue involved in the two cases are different. 11.3 It was held by the Apex Court in the said case that, if the transaction is between two independent companies, the 'look at' theory is to be applied instead of 'look through theory. It is thus submitted that look at theory had to be followed in respect of instant transaction of investment and acquisition of shares between independent and unrelated legal entities. It is submitted that the efforts of the authorities to hold the transaction to be 'sham' is based on their appreciation which is not only unsupported by evidence but following the look through' theory. 11.4 It is added here that a complete reading of the above judgments would only shows that in order to lift corporate veil, it needs to established beyond doubt that the transaction in question is taxable in the charging section of the Act and the taxes were avoided by the group by interposing the subsidiaries; which has not been done and, can be neither established. 11.5 It is further submitted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er best suited to it and the revenue authority cannot step into the shoes of the businessman and it is not for the revenue to attack a transaction on the ground that the same was imprudent and thereafter to record the finding that the same was sham. Attention in this regard is invited to the following decisions: i) 288 ITR 1 (SC) S.A. Builders Ltd. vs. CIT ii) 345 ITR 421 (Del) CIT vs. EKL Appliances Ltd 14 In nutshell, the appellant's submission is that revenue overlooks fundamental evidence furnished by appellant company. In the present case, it is an undisputed fact and admitted by the AO/DRP that NBC Universal Inc, (a leading and an independent Group and the Joint Venture of the GE group) through its group company, Universal Studios International BV, subscribed to new shares amounting to USD 150 Mn (Rs. 642.54 crores) in a NDTV Group Company namely NDTV Networks International Holdings BV (NNIH) (a company incorporated as per the laws of Netherlands and resident of that country) on May 23, 2008. It is also undisputed that investee had issued shares to USBV, a subsidiary of NBCU, a world-wide-known company, engaged in entertainment business, which had duly confirmed the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NDTV Network Plc. which is also subject matter of ground no. 4. Remaining amount of approximately ₹ 398 crores was introduced as equity in NDTV Mauritius which was further introduced as equity contribution in NDTV Studios. The above investments stands duly examined and verified after making due verification in the order of assessment of NDTV for AY 2009-10 and 2010-11 along with financial statements as is annexed herewith at pages 288-304 of PV-VIII. 19 Thus, it is most respectfully submitted that the action to make addition in the hands of the appellant company, a ultimate holding company has no legal basis. 20 Before concluding, it is submitted the aforesaid brief submissions are being made within a short time to less than 18 hours." 96. Subsequent to the assessment proceedings, the penalty proceedings initiated u/s 271(1) (c) were going on and on 15.06.2016 a show cause notice was issued to the assessee consisting of 14 pages. During the penalty proceedings, the revenue collected further evidence by recording statements of Shri KVL Narayan Rao u/s 131 on 23.07.2015 in presence of two witnesses Shri Ajay Mankotia and Mr. Satish Minocha. A further statement u/s 131 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 642,54,22,000/- (US $150 million) was received during the year by NNIH. The amount was received on account of subscription of 915,498 shares into NDTV Networks International Holdings BV equivalent to 26% effective indirect stake in NDTV Networks Plc. 7. It is further noticed that taking into account the consideration of ₹ 642,54,22,000/- for 915,498 shares, the sale value per share thus comes to ₹ 7,015.05 per share. The face value of share of NNIH at the relevant time was around $ 1 per share, i.e. equivalent to ₹ 45/- to ₹ 50/- per share approx. 8. The above sale value was despite the fact that neither NNIH nor NNPLC were having any business activities. NNIH was a holding company and NNPLC was incorporated to promote the interests of NNIH and other group companies. NNPLC did not have any business activities. It had no fixed assets and there was no rent paid. NNPLC did not even have any employee in UK and the only employee in NNPLC was Mr. Vikramaditya Chandra, who was designated as CEO of this company. However, Mr. Chandra was also based in India only. Apart from incorporation in UK, NNPLC had no presence in UK. The address of NNPLC in UK was that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to be carried out before the end of financial year 2009-10 on 31.03.2010. However, even before the 1st annual review could take place, the shares were allegedly bought back by NDTV Networks BV without any review of progress of business plan and without any valuation carried out by either party. These facts made it evident during the assessment proceedings that the transaction was not genuine. 11. The whole transaction thus had no commercial purpose or economic substance and its purpose was merely to evade tax and to constitute sham, colorable or bogus transactions with the pretense of corporate and commercial trading and in such circumstances, the corporate veil was therefore pierced while making the assessment of the assessee company. Once the corporate veil was lifted in the context of the impugned transaction in the present case, the clear facts emerging regarding the transaction revealed that the transaction was engineered to result in claim of loss to USBV and corresponding routing of the assessee's own undisclosed money through its subsidiary. This finding has been confirmed by the DRP. 12. While confirming the above findings, the DRP has specifically observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sole motive of introducing ₹ 642,54,22,000/- in its books and providing loss of ₹ 584.46 crores to Universal Studios BV Netherlands. 5.16.1. In view of the facts and finding as mentioned above and taking the totality of the picture into consideration, it is held that assessee has brought an amount of ₹ 642,54,22,000/- being unexplained money in to its books through its subsidiary NDTV Networks BV Netherlands. It is pertinent to mention that, as per the admission of the assessee the above subsidiary has been subsequently liquidated, which shows that the same was floated only to create a front for introducing the above amount. " [Emphasis supplied] 13. From the above, it is evident that there is a finding arrived at in the assessment order regarding creation of a fagade in the nature of complex corporate structure and routing of money through sham transactions using this structure and this finding has been confirmed by the DRP as narrated above. Findings during the course of penalty proceedings 14. Copy of agreement dated 23.05.2008 filed during the course of assessment proceedings was not reliable evidence 14.1 During the assessment proceedings for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consists of 5,000 shares (2007: 5,000 shares) of EUR 453.78 each. The issued and fully paid share capital comprises 2,680 shares (2007: 2,680 shares) of EUR 453.78 each and has been translated into USD at the year-end exchange rate (December 31,2008: EUR 1 = 1.35240; December 31,2007: EUR 1 = USD 1.447890). All shares are held by NBCU Dutch Holding (Bermuda) Limited acting in its capacity as General Managing Partner of CA Holding CV, Bermuda." [Emphasis supplied] 16. Money introduced as share application money and securities premium transferred to NDTV in the form of dividend 16.1 NNIH was also a shell company 100% owned by NDTV. It had no assets, employee, business or commercial activities. The only asset was the direct ownership of shell company NDTV Networks BV and indirect ownership of another shell company NNPLC. The entire capital of NNIH was a mere ₹ 12 lacs invested by NDTV. Inspite of this, NNIH was able to issue fresh shares of the value of ₹ 6 lacs and was able to sell those fresh shares of ₹ 6 lacs value at an astronomical share premium of ₹ 642.48 crores received from USBV, the subsidiary of an entity based in tax haven jurisdiction Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an indirect and circuitous contrivance. 16.3 Further, Mr. Rao also admitted in replies to question no. 13, 15 and 16 that no valuation was ever carried out in respect of value of shares of NNIH, neither at the time of alleged subscription by UCBV nor at the time of buyback by NDTV Networks BV. The alleged purpose of the impugned transaction of introduction of funds of USD 150 million by USBV in NNIH was stated to be acquisition of effective indirect stake of 26% in NNPLC. As discussed in para 8 above, NNPLC was a paper company having no worth. In his statement, Mr. Rao fairly admitted in response to question no. 13 that NNPLC got a value of USD 400 million, when ComVentures (now Fuse+ Capital) invested USD 20 million for 5% stake in NNPLC. It is thus clear that even the value ascribed to NNPLC was not based on any real worth, rather, it was a mathematical value, and the transaction of infusion of USD 20 million in NNPLC was an instrument for creating such artificial value. By infusion of USD 20 million corresponding to 5% of shares of NNPLC, mathematically taking the multiplier of 20, the value of NNPLC was artificially put at USD 400 million, apparently in order to make a groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Vivek" (ii) Mail dated 22.05.2008 at 02:09 AM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others: -Subject: Re: Press Announcements etc For everyone .. This is very important... Could we please have a draft press release Vivek... Which we can use and send to nbcu. ... If possible, it's important that the press release should make clear that the money comes in to NDTV and does not stay in Networks" (iii) Mail dated 22.05.2008 at 07:58 A M from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy & others: "Subject: Re: Press Announcements etc Prannoy... I need to start with a base case draft ...can somebody give that to me.. Your second requirement is something I would avoid saying....let's discuss after I have seen a base draft BR Vivek" (iv) Mail dated 22.05.2008 at 02:14 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others: "Subject FW: Press Announcements etc Dear Vivek... Need your final version on this please ... It will be released In a few hours and will need to be cleared by NBCU before that... The problem we have it that in the last communication we created a real mess: Thx Prannoy Dear Vivek... Here's a first bash NDTV and NBCU successfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship with NBCU group, the parent company NDTV Ltd and it's wholly owned subsidiaries now have access to funds of US $150 mn which gives it the flexibility to use for any opportunities in the future including acquisitions, expansion in the news space, or in the beyond-news space as and when they arise."(vii) Mail dated 22.05.2008 at 05:30 PM from Mrs. Radhika Roy to Mr. KVL Narayan Rao, Dr. Prannoy Roy & others :"Subject: RE: Press Announcements - Final ? Dear Narayan, But this doesn't really address prannoy's concerns arising from our earlier communication and it would be a pity to miss this opportunity to correct any misconceptions. Just to remind you prannoy's four points below:"1. Everyone thought the money was to be put into Networks ... As a result we got no shareholder value for the ₹ 600 crs in NDTV 2. It's very important to state that the money is not in Networks ...But in NDTV ... As this affects the valuation analysts give to the deal... And it's a big boost if they know it's not in Networks and it is in NDTV... I know we can't say stake sale (which it is not anyway)... But we do need to clarify that the money is not in Networks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 written by Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy is an unambiguous advice to Dr. Roy to conceal the true import of the transaction and not to mention that NDTV was receiving the 150 million as dividend or otherwise. It is interesting to observe that even before the inception of shareholding of USB V in NNIH on 23.05.2008, the payment of dividend exclusively to NDTV was fixed. Another mail dated 22.05.2008 written by Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy honestly cautions Dr. Roy that the problem could become worse if NDTV gave a handle to the tax authorities. 18.1 It is pertinent to mention that all agreements, whether pertaining to alleged subscription of stake by USBV in NNIH or alleged buyback by NDTV Networks BV, are invariably signed by NDTV itself. As the other companies signing the agreement are mere paper companies and only the assessee company is a real company, therefore, it is clear that the actual party is the assessee company only and the paper companies are only namesakes. 18.2 This proves it beyond doubt that the transaction, which was a colorable device as explained by the Honble Supreme Court in the case of McDowell & Co. Ltd. V. CTO [154 ITR 148 (SC)], w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DI into these companies in India. 19.2 Furnishing of inaccurate particulars by the assessee (i) The assessee company has furnished documents, which had no evidentiary value, because the agreement dated 23.05.2008 is not signed by all the parties on the same page, the copy of agreement given is not apostle certified and the Bermuda parent of USBV is not even a party to this agreement. 20. Conclusion 20.1 In view of the above facts and circumstances of the case, which involve active, deliberate and planned concealment and misrepresentation of facts, this is a fit case, which merit levy of penalty @ 200% of the tax sought to be evaded. Accordingly, you are requested to show cause as to why penalty u/s 271(1)(c) of the Act read with Explanation 1 thereof may not be imposed upon the company for concealment of the particulars of its income in respect of the impugned addition of ₹ 642,54,22,000/-. 20.2 Similarly, regarding the other three additions as mentioned in para 4 above, you are requested to show cause as to why penalty u/s 271(1)(c) of the Act read with Explanation 1 thereof @ 100% may not be imposed upon the company for concealment of the particulars of its income in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the investor on 23.05.2008 @ ₹ 7015.05 per share were sold on 14.10.2009 @Rs. 634.17 per share. During the course of assessment proceedings it was submitted that determination of the price for the purchase of share on 23.05.2008 was an agreed price between the two parties and therefore there was no valuation report. However, in the agreement dated 23.05.2008 for the subscription of share clause No.6 provided for an option to the investor for exit. According to clause 6.2 of that agreement at the time of exist the fair market value of the share was required to be determined according to clause No. 6.8. However, clause No. 6.8 was only referring to the methodology of the appointment. It was explained by assessee that consideration at the time of exist was also the price requested by the seller of US$25 million, which was bifurcated into 12527250 with respect to the shares and balance 12472750 with respect to the receivable. Therefore the total consideration for shares and receivable was US$25 million. To understand the above transaction it is necessary to note the structure of the subsidiary companies formed by the assessee for above transactions. 99. The assessee an Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of NDTV BV (amalgamated company) were repurchased by NNBV. Apparently at that time the shareholders of NDTV BV were NNBV and USBV. Therefore, NNBV purchased from USBV on 14.10.2009 shares for ₹ 58 crores which were acquired by USBV on 23.05.2008 by making subscription in NNIH. To substantiate the transaction the assessee submitted the copies of the agreement such as shareholders agreement and share subscription agreement dated 23.05.2008. Copies of the bank account of the investor company i.e. USBV, the annual accounts of the investee company i.e. NNIH, the confirmation letter from USBV, annual report of USBV to substantiate the above transaction. The assessee also stated that the parent company of USBV is NBC Universal Inc. and NBC Universal is a part of GE Group (General Electric) which is as submitted by the assessee was one of the largest global business group and hence it was claimed by the assessee that identity and creditworthiness of the transaction was proved. 102. However, the case of the revenue is that the above transaction entered into by the assessee through creating a complex structure of cobweb of subsidiaries and routing the money in India or under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.04.2008 by NDTV Network BV to create the corporate structure for the global media and non-news media related business. The balance sheet was prepared on 30.04.2009 for the period ended on 10.04.2008 to 31.03.2009 as the company was merged on 01.04.2009. Admittedly as per the balance sheet as well as the profit and loss account there were no business activity. There was no explanation from the assessee for what kind of activity this company was doing and for what reason the Netherland Jurisdiction was selected. Furthermore, in Schedule-II to the annual accounts in the securities premium accounts of ₹ 642,54,22,169/- in the same year dividend was paid out of that security premium amounting to ₹ 643,35,00,000/-. Therefore, the company which did not have any business and did not have any worth but because of the share premium collected has declared the dividend more than the security premium received by it. It is interesting to note that at the end of the first accounting period the company went into negative net worth having share capital of ₹ 18,40,227 and negative reserve of ₹ 38,88,870 resulting into negative net worth of ₹ 20.48 lakhs. Generally it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation from the assessee on this issue. It creates a suspicion that whether for all understanding the share holding of the NDTV BV and USBV are having similar rights or not. From the conduct it appears that they are not. Further the valuation exercise of the shares of the company was stated to be not done, as it is a mutually agreed price based on business potential. No such evidences were led before lower authorities or even before us to show that whether there is any cash flow stream available, whether there is any IPR existing with the investee company which has such a huge valuation. There is no iota of evidences led before us. On the issue of the premium of the shares assessee has merely done the lip services. Further it is also stated that due diligence is not to be done by the assessee or its group company but it is the requirement of the investor. When the assessee is ready to produce investor before the bench but is not in a position to enquire from the investor about any due diligence process at the time of investment, term sheets, etc, the mere assertion of the assessee of production of investor before us is also a hollow legal argument without any substance. Further the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent that the board of directors of NBCU was also not interested in being on the Board of this company. On reading of the minutes it is apparent that there was no interest of those directors in the business of NDTV Group. It is also apparent from the minutes that none of the directors objected to the distribution of dividend by NNIH. The NNIH did not have any representation in the board of that company where the decision to distribute the dividend was taken. No rationale were produced before us for distribution of the dividend by producing the board meeting of NNIH to exhibit the business consideration behind declaration of dividend of ₹ 643 crores only to NDTV Group subsidiary and not also to USBV was holding 31% share in that company. The rationale behind formation of this company in Netherland jurisdiction was also not placed before us despite the DRP and ld Assessing Officer has challenged the substance of the transaction. Netherland jurisdiction did not have any tax on the distribution of dividend at that particular time and also there is no need of establishing the substance in that jurisdiction. In view of this looking at the whole of the transaction the Netherland jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Therefore it is apparent that this company is mainly an investment company formed in Netherlands as its tangible fixed assets are very low compared to its financial assets of investments. Further, its group investments are very rare in Netherlands but its participating interest investments are mostly in Netherlands in non-group companies. One must take a clue that an investor who has invested ₹ 643 Crores is not aware about the merger of the investee company and not caring about the dividend income how serious that investor is. Further, within a short span of time of signing the board reports this company is making an offer to sell its stake in that company for substantially lower sum. There is no mention in the company's report about the activities for exploring the access to Indian television market and there is no such information coming from the assesse about the joint business plan which was devised and executed. Therefore it is apparent that statements made in the Report of board of director were just eyewash. In any way because of our finding at the time of examining the profile of the investee company it becomes apparent that investor is no more interested about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NDTV parent NDTV BV A group subsidiary in Netherlands As the company whose shares are not being transferred on account of merger with NNIH with this company on 01.04.2009 NDTV Networks BV Another group subsidiary in Netherland As a share holder of the NDTV group in the investee company Is the purchaser of the share from USBV on behalf of NDTV Group NDTV Networks PLC A company incorporate in England who holds the shares of operating companies As part of the owner of the operating companies NDTV Networks international holdings BV NNIH is the investee company in Netherland jurisdiction The investee company This company was not there in this agreement for the reason that it got merged on 01.04.2009 with NDTV BV Purpose of the agreement For investing an initial interest by USBV of 9145918 ordinary shares in the company i.e. NNIH to acquire indirect share holding of 26% in NDTV PLC a holding company of the operating company in UK. The face value of the share was 0.01 EURO per share and the premium was ₹ 642 crores. The purpose of this agreement is to facilitate acquisition of shares. To sell the shares being 27695 ordinary shares of face value of 0.01 EURO in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evidence of secondment of the employees by the NBCU, there is no evidence placed on record of the joint venture between NBCU parent and NDTV in India and no such joint venture company was stated to have been operating, there were no opportunities noted and recorded with respect to digital media and India, there was no documented evidence produced with respect to investment opportunity in India in relation to cable platform, there were no acquisition or any efforts put for such acquisition were demonstrated, the dividend policy was violated by distributing ₹ 643.35 crores. The exit agreement was only containing the provisions for reversing all the documents which were executed at the time of share purchase agreement. Whether it is strategic partnership or a financial partnership On the reading of the agreement and looking at the conduct of the parties in pursuance of these agreements it is clear that except the financial transaction which are under challenge there is no other activities demonstrated before us for the growth or development of the business. Therefore, the real fact that emerges is that it is the financial transaction which was the only important aspect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, i.e., treat a company as a separate person. The Indian Income-tax Act, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies and other entities subject to Income-tax. Companies and other entities are viewed as a separate person. The Indian Income-tax Act, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies and other entities subject to Income-tax. Companies and other entities are viewed as economic entities with legal independence vis-a-vis their shareholders/ participants. It is fairly well accepted that a subsidiary and its parent are totally distinct taxpayers. Consequently, the entities subject to Income-tax are taxed on profits derived by them on standalone basis, irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to the shareholders/participants. Furthermore, shareholders/participants, that are subject to (personal or corporate) Income- tax, are generally taxed on profits derived in consideration of their shareholding/participations, such as capital gains. Nowadays, it is fairly well settled that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same group, will be totally or partly ignored as a device or a conduit (in the pejorative sense). 68. The common law jurisdictions do invariably impose taxation against a corporation based on the legal principle that the corporation is "a person" that is separate from its members. It is the decision of the House of Lords in Salomon v. A. Salomon and Co. Ltd. [1897] AC 22 that opened the door to the formation of a corporate group. If a "one man" corporation could be incorporated, then it would follow that one corporation could be a subsidiary of another. This legal principle is the basis of holding structures. It is a common practice in international law, which is the basis of international taxation, for foreign investors to invest in Indian companies through an interposed foreign holding or operating company, such as Cayman Islands or Mauritius based company for both tax and business purposes. In doing so, foreign investors are able to avoid the lengthy approval and registration processes required for a direct transfer (i.e., without a foreign holding or operating company) of an equity interest in a foreign invested Indian company. However, taxation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the question as to whether the impugned transaction is a tax deferment/saving device but that it should apply the "look at" test to ascertain its true legal nature (See Craven v. White (supra) which further observed that genuine strategic tax planning has not been abandoned by any decision of the English courts till date). Applying the above tests, we are of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/courts should keep in mind the following factors : the concept of participation in investment, the duration of time during which the holding structure exists ; the period of business operations in India ; the generation of taxable revenues in India ; the timing of the exit ; the continuity of business on such exit. In short, the onus will be on the Revenue to identify the scheme and its dominant purpose. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colourable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.49 crores merged with NDTV one Holding Ltd, Mauritius w.e.f September 2011 and the amalgamated entity also the 100% subsidiary of NDTV. The NDTV one Holding Ltd Mauritius merged with NDTV Studious ltd and NDTV Studious Ltd then merged with NDTV (assessee) w.e.f 01.09.2012. in view of this money trail established by the Revenue could not be controverted by the assessee. This money trail stares so glaringly on the various complex structures created by the assessee that without proving any substance one cannot reach to any other conclusion but to the conclusion that series of the transaction entered into by the assessee were to transfer ₹ 642 crores from the investor company or the owner of the investor company to the assessee. 110. It is interesting to note that certain emails were gathered by revenue through enquiry during the course of penalty proceedings by examination of some person. Such exchange of mails was recorded at para No. 6.5 of the show cause notice issued by the ld Assessing Officer u/s 271(1)(c) of the Act. These emails were given to the ld Assessing Officer by one Mr. Sanjay Dutt, who was examined u/s 131 of the Act by the ld AO. These mails are pertaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou to provide details of all such material , enquiries, complaints and other evidence collected in relation to assessment of the year in question as well as in present proceedings or advise the assessee to seek these details under Right to Information irrespective of the fact that whether the same is adverse to the assessee or in favour of the assessee. The above request has been made in the interest of justice and equity and to be considered favourably." 111. On reading the reply of the assessee, it is apparent that emails are not denied that the executives of the assessee are recipient, sender, and part of the correspondence. The assessee has strategically avoided to comment on the content of the email by simply stating that AO must establish the genuineness, authenticity and source (GAS) of the said document so that assessee could make specific submission and originals of the above may also be made available for verification. Had these mails were inappropriate/ false evidence assessee would have denied them vehemently. Instead, the assessee has asked LD AO to establish the genuineness, authenticity, and sources of the evidence without denying it. According to us, there is no oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Announcements etc Dear Vivek... Need your final version on this please ... It will be released In a few hours and will need to be cleared by NBCU before that... The problem we have it that in the last communication we created a real mess: Thx Prannoy Dear Vivek... Here's a first bash NDTV and NBCU successfully closed their strategic partnership in the NDTV subsidiary NDTV Networks. For a consideration of US $150 million, NBCU now has an indirect and effective stake of 26 % in NDTV Networks PLC. This effective 26 % stake is held through a proportionate stake in the holding company of NDTV Networks PLC NBCU has the option in three years to increase their stake in the Networks PLC's holding company to 50%. The NBCU option to increase their stake will be at FMV (Fair Market Value) at the time the option is exercised. It has been agreed that management control will always remain with NDTV Ltd. As a consequence of this successful closing of the partnership with NBCU, the parent company NDTV Ltd now has funds of US $150 which gives it the flexibility to use for any opportunities in the future including acquisitions, expansion in the news space, or in the beyond- news sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant to state that the money is not in Networks ...But in NDTV ... As this affects the valuation analysts give to the deal... And it's a big boost if they know it's not in Networks and it is in NDTV... I know we can't say stake sale (which it is not anyway)... But we do need to clarify that the money is not in Networks" [Emphasis supplied]" 112. From contains of the mail, the addressee and recipients of the mail it is quite apparent that whole structuring is an eye wash with the only intention to bring 150Mn USD to NDTV ( assessee) without there being and liability to pay it back. This what is achieved by the assessee by creating all these agreements, subsidiary in different jurisdictions etc. We are not inclined or to waste our time on the discussion of these emails because they are so obvious and glaring to show the intention of the parties. 113. It is also important at this moment to mention that the subsidiary structure created by the assessee and investor in Netherland. The creation of a subsidiary in a particular jurisdiction has to have a business case. It is a matter of common knowledge that Netherland was classified as one of the low tax jurisdiction. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a party, in fact the assessee is the beneficiary of whole transaction. Further, the reason for rejection of argument about chargeability u/s 69A is that it applies wherein, in any financial year where the assessee is found to be an owner of any money etc which is not recorded in the books of account if any maintained by him and the assessee offers no explanation about the nature and source of the acquisition of the money or the explanation offered by him is not in the opinion of the ld Assessing Officer satisfactory then such money may be deemed to be the income of the assessee for that financial year. In the present case, the assessee is found to be the owner of the money by the ld Assessing Officer which has been received by the subsidiary in offshore jurisdiction and which has travelled to the coffers of the assessee. The explanations offered by the assessee with respect to the ownership of such sum was not satisfactorily explained according to the Assessing Officer and therefore, such some has rightly been deemed to be the income of the assessee. Furthermore the argument of the ld AR that money is received by the subsidiary company of the assessee and not by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case, it is the statement of the assessee that funds have been raised for the purposes of the business. Further revenue has established the complete modus operandi of the assessee to show that money provided by other parties in offshore jurisdiction have come back into the coffers of the assessee without any obligation of repayment. Further, in that particular case there were contradictory claims of the revenue that assessee was a conduit company and still some addition in that particular company was made holding it to be undisclosed income of the assessee. There was also no close connection between the investors as well as the company. In the present case there is no allegation that assessee is a paper company , in fact it is in business but the only allegation is that assessee is found to be an owner of ₹ 642 crores invested by a third party in foreign jurisdiction without any substance in the transaction and therefore, revenue charged it into the hands of the assessee. Further, in that particular case all the investors were regularly assessed to income tax and some of them appeared before the assessing officer also. However, in the present case no evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that when the money is transmitted through banking or other indisputable channels the transactions would be proved and for the purpose of genuineness of the transaction the copies of the share holder register, share application form, share transfer register would suffice. The creditworthiness of the creditor can be proved by producing the bank statement then the assessee has discharged the onus. He therefore, submitted that in the present case the complete details as mentioned in the decision has been submitted by the assessee and therefore, the onus has been discharged. We have carefully considered this decision and we have no hesitation in rejecting the reliance because of the reasons that in the present these details were made available before the ld DRP and then ld Assessing Officer carried on enquiry in remand proceedings. During the course of hearing before us the revenue has produced the money trail as well as certain emails, which were not at all denied by the assessee. Therefore in our view the assessee has submitted scanty details and also tried to hide certain facts by not denying or owning the emails exchanged. Further it is too naive to accept in the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan was from NDTV Networks BV and above amount was disclosed in the books of NNPLC and NDTV Network BV. The assessee further supported the same with the copies of the financial statement of both the above subsidiaries. The unsecured loan was also pursuant to loan agreement dated 10.11.2008 between Universal Studio International BV, NDTV, NNPLC and NDTV networks BV. Assessee further submitted the confirmation of the loan, however, as the loan confirmation did not have the bank certificates along with the confirmation therefore, the AO was of the view that assessee has failed to discharge its onus of proving the identity and creditworthiness of the lender and genuineness of the transaction. The ld AO was also of the view that the copies of the documents furnished by the assessee were only photocopies. The ld DRP on consideration of the issue found that out of ₹ 365.25 crores ₹ 110.50 crores is due to the restatement of the original amount pertaining to FY 200-08. It was also noted by the ld DRP no disallowance was made in AY 2008-09 and therefore, the disallowance/ addition to the extent of ₹ 110.5 crores cannot be made. However, the ld DRP held that above loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 365.25 crores allegedly received by NDTV through its subsidiary NDTV Network Plc ("NNPLC") and the tax implication thereof. 2.4.2 Vide this office's letter no. 1705 dated 11.11.2013, the assessee was asked to explain on the issue as under :- "2.3 During the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. Please furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. ..." 2.4.3 In response, vide letter dated 26.11.2013, the assessee contended that during the year under consideration, there was an increase of ₹ 110.50 crores in the amount of unsecured loans in the Balance Sheet of NNPLC, which represented an increase due to currency fluctuation. The assessee further stated that during the previous A Y 2008-09, it had raised loans amounting to ₹ 399 crores by way of Step Up Coupon Bonds and the enquiry regarding the source and genuineness thereof had already been completed during the course of assessment proceedings for AY 2008-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings for AY 2008-09. (ii) Complete information with respect to raising of bonds claimed to have been filed before Investigation Officer and DIT (Intl) during the course of assessment proceedings. 2.2.4 In this regard, please also refer to letter filed by you on 29.11.2013, wherein you have stated that the increase of ₹ 110.50 crores in the Step Up Coupon Bonds is merely the reinstatement of foreign currency liability. In this regard, please furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of ₹ 254.75 crores in the unsecured loans, you have claimed that the relevant documents have been filed during the assessment proceedings. Perusal of the assessment record reveals that there are no such documents on record. Accordingly, you are given an opportunity to now file these documents, which are claimed to have been filed by you earlier. 2.2.6 In the absence of the discharge of onus by you in respect of the above transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this office's letter no. 1705 dated 11.12.2013, the report in the matter is submitted as under :- 2.1 Tax implication of unsecured loans amounting to ₹ 365.25 crores received by NDTV through its subsidiary NNPLC2.1.1 The Hon ble DRP vide letter no. 262 dated 28.10.2013 had directed further enquiries to be made regarding the unsecured loans amounting to ₹ 365.25 crores allegedly received by NDTV through its subsidiary NDTV Network Pic ("NNPLC") and the tax implication thereof. 2.1.2 Vide this office's letter no. 1705 dated 11.11.2013, the assessee was asked to explain on the issue as under :- -2.3 During the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. Please furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. ..." 2.1.3 In response, vide letter dated 26.11.2013, the assessee contended as under :- -5. Furnish the details in connection with assessee company, through guarantees, raising an amount of ₹ 362,25,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in this regard is enclosed as Annexure - 2 of this submission. 5.6 In respect of the loan liability of Step up Coupon Bonds, during the immediately preceding year i.e. AY 08-09, the complete enquiry was made by AO of NDTV in respect of issuance of bonds by NNPLC. In this regard that the reference was also made to FT & TR and the information was called from HMRC, UK. The assessment for AY 08-09 was completed and the addition of guarantee fee under section 92C of the Act was made. The reason for said addition was based on premise that NDTV had provided an undertaking to give guarantee to Bondholders during the period of bond holders agreement, thus, it ought to have charged guarantee fee, being an international transaction under the section 92B of the Act, from NDTV Networks Plc. The similar addition of Guarantee fee was also made in AY 09-10 by TPO. Further, the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09. The above bond amount is duly confirmed by NNPLC to HMRC, UK on the requisition of FT & TR. Further, the complete information with respect to raising of bonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twork Plc, UK being with the assessee company M/s. New Delhi Television Limited was also confronted as under :- "2.1.1 Neither NNIH nor NNPLC were having any business activities. NNIH was a holding company and NNPLC was incorporated to promote the interests of NNIH and other group companies. NNPLC did not have any business activities. It had no fixed assets and there was no rent paid. Apart from incorporation in UK, NNPLC had no presence in UK. The address of NNPLC in UK was that of the Company Secretary dealing with its tax matters. The Directors of NNPLC were Indian and the audit report of NNPLC was signed at Gurgaon in India. The authorized share capital of NNPLC was only about ₹ 47 lacs. 2.1.6 In response, the assessee vide its letter dated 29.11.2013 replied as under :- ""1.13 Without prejudice to our submission, i.e. the transaction in question is genuine transaction and has been done through banking channel and in accordance with shares subscription agreement, therefore no adverse inference could be drawn in any manner, your attention is also drawn to the recent amendment of Finance Act, 2012 wherein the legislature has inserted section 56(vii)(b) wherein they have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to FT & TRto your office wherein they have provided all the information regarding existence of NNPLC and tax compliance in accordance with UK tax laws i.e. filing of its tax returns, WHT returns, etc. 3. Furnishing of evidence in relation to reinstatement of forex liability amounting to ₹ 110.5 Crores As earlier submitted, the increase of ₹ 110.5 Crores in the Step up Coupon Bonds at year end in books of NNPLC is merely the reinstatement of foreign currency liability in accordance with Accounting Standards. It is most respectfully submitted that no fresh loan whatsoever was raised by NNPLC in respect of the Step up Coupon Bonds. The amount so increased in debited to Currency Translation Reserve in the books of accounts of NNPLC (Please refer to Schedule - 2 Reserves & Surplus).In respect of your specific query with respect of the evidence of such reinstatement, please find attached the complete details of the quarterly reinstatement as Annexure -1 to this submission. In respect of the evidence of the exchange rates applied in the above computation, the quarterly rates as available are annexed as Annexure -2 of this submission." 2.1.7 Further, vide this office lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 110.50 crores in the Step Up Coupon Bonds is merely the reinstatement of foreign currency liability. In this regard, please furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of ₹ 254.75 crores in the unsecured loans, you have claimed that the relevant documents have been filed during the assessment proceedings. Perusal of the assessment record reveals that there are no such documents on record. Accordingly, you are given an opportunity to now file these documents, which are claimed to have been filed by you earlier. 2.2.6In the absence of the discharge of onus by you in respect of the above transactions of raising unsecured loans, in the light of facts of the case discussed in the foregoing paras of this letter read with letter dated 27.11.2013, please explain and substantiate your position." 2.1.8 The assessee filed reply dated 09.12.2013 stating as under "2. Regarding the raising of ₹ 365.25 Crores as unsecured loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Draft Assessment Order dated 31.03.2013 as under :- "During the year the assessee company through its guarantees raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary M/s NDTV Networks Plc. At the present stage the assessee has not discharged its primary onus regarding receipt of this amount by way of unsecured loan and therefore is liable to be proceeded against under the provisions of section 68 and 69A of I T Act, 1961. However, the assessee has not been afforded the reasonable opportunity to discharge its primary onus for the simple reason that the relevant and material information was furnished by the assessee only on 30.03.2013 and there was simply no time humanly available to afford such an opportunity to draw a balance between the interest of public revenue and the rights of the assessee, for the present the adverse inference against the assessee is not being drawn and appropriate remedial measures will be taken in due course." 2.1.11 Accordingly, vide this office's letter no. 961 dated 29.08.2013 as forwarded vide CIT, Delhi-V, New Delhi's letter no. 1269 dated 03/09.09.2013, the Honble DRP was requested to consider causing further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPLC was made subsidiary of NNBV, when a month after incorporation of NNPLC, NNBV was incorporated in December, 2006. Thus, being 100% subsidiary, NNPLC was conceived and controlled by NDTV. Although NNPLC cannot be said to be an agent or mere extension of NDTV solely on the ground of its being 100% subsidiary of NTDV, the facts regarding the control exercised by NDTV over the affairs of NNPLC are discussed below. 2.1.18 NNPLC was incorporated on 30.11.2006 with a meager capital of about ₹ 40 lacs only and was liquidated on 20.10.2011. The stated purpose of NNPLC was to create new business areas for NDTV as well as to unlock value of existing operations and skills, however, NNPLC did not carry on any business activities on its own. In between its incorporation and liquidation, the activities of NNPLC as the role of NDTV therein, are summarized below :- Financial Year Activities Role of NDTV 2007-08 USD 100 million were raised through Step Up Coupon Convertible Bonds. NNPLC had only a meager capital of ₹ 40 lacs and did not have any business activities, any fixed assets, any place of business except a postal address in UK, was a new entrant without any performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e those of NNIH and not of NNPLC, the 2nd in vertical subsidiary of NNIH, yet it can be seen that the emphasis is on NNPLC and there is no reference to NNIH or NDTV BV. It is further pertinent to mention that the repurchase, occurring barely after 18 months, was for about ₹ 58 crores only as against the 'purchase' for ₹ 642.54 crores. There is no rationale in this transaction - no commercial purpose or economic substance, other than to create a loss of ₹ 584 crores for NBCU and introduction of own unaccounted money for NDTV. (ii) NNPLC repurchased US$ 100 Million Step up Coupon Convertible Bonds issued by it earlier. (ii) The final transaction before the liquidation of NNPLC was the purported repurchase of Step Up Coupon Convertible Bonds. However, the price of the coupons reflected at ₹ 399 crores as on 31.03.2008 and at ₹ 509.50 crores as on 31.03.2009 (the difference of ₹ 110.50 crores stated to be on account of currency fluctuation) would further escalate at the time of repurchase and when NNPLC had a capital of ₹ 40 lacs only and investment in loss making companies, then it remains to be verified as to how NDTV / NNPLC discharged its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as introduced unsecured loans amounting to ₹ 254.75 crores from NDTV BV in the books of NNPLC. The tax implications of this issue are the subject matter of the present report, which necessitated the lifting of corporate veil first, as discussed in the preceding paras of this report. 2.2 Regarding enhancement of liability on account of Step Up Coupon Convertible Bonds by ₹ 110.50 crores 2.2.1 As discussed above, USD 100 million were reflected to have been raised through Step Up Coupon Convertible Bonds during FY 2007-08. As stated in para 2.1.2 of this report, vide this office's letter no. 1705 dated 11.11.2013, the assessee was asked to explain on this issue, and in response, vide letter dated 26.11.2013, the assessee stated that the source of investment in Bonds was duly verified by the AO during the assessment proceedings for A Y 2008-09 and also through information obtained from UK tax authorities through FT & TR. It was contended that complete details regarding investors and source of investment was given to the AO at the relevant time. The details were also stated to have been furnished before Investigation officer and DIT (Intl) during enquiries by these officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPLC's intermediate holding company NDTV Networks BV and the relevant details had been filed during the course of assessment proceedings for AY 2008-09. 2.3.2 Vide letter dated 05.12.2013, it was intimated to the assessee that on perusal of assessment record for AY 2008-09, no such documents were found. Accordingly, the assessee was given an opportunity to now file these documents, which were being claimed to have been filed by it earlier. The assessee was also intimated that it had not discharged the onus cast upon it in respect of the above transactions of raising unsecured loans. 2.3.3 In response, the assesse filed reply dated 09.12.2013 stating that with respect to the unsecured loans amounting to ₹ 254.75 crores, the source thereof was loan form NDTV Networks BV and the amount was duly disclosed in the books of NNPLC and NDTV Networks BV and the copies of the financials statements of both the above subsidiaries were filed before the Ld. AO during the course of assessment vide submission dated 27.02.2013 & 11.03.2013. The copies of the said submissions were claimed to be duly enclosed as Annexure E1 & E2 of the reply dated 09.12.2013. 2.3.4 I have perused the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es reflected as increase in liabilities, an amount of ₹ 110.50 crores was due to restatement of the original amount pertaining to the transaction occurring in FY 2007-08 relevant to AY 2008-09. Regarding the balance amount of ₹ 254.75 crores, the DRP held that the assessee failed to discharge its onus of proving the genuineness of the transaction. The observations of the DRP are reproduced below -5.17. AO has brought to the notice of the DRP through his letter dated 20.08.2013 forwarded by the Addl. CIT, Range-13, New Delhi that an amount of ₹ 365.25 crores was raised by the assessee company which needed further examination. The relevant part of the letter of the AO is as under: "10. Another issue involved in the case is that during the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. As the information was stated to be furnished by the assessee on 30.03.2013, i.e. just one day before the expiry of limitation, therefore, this aspect also could not be probed by the AO as to the identity of the payers, the creditworthiness of the payers and the genuineness of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of an amount of ₹ 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. You have stated in your reply filed on 26.11.2013 that sum of ₹ 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of ₹ 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertions. 2.2.2 In your above reply, you have also alleged as under :- "Further, the complete list ofthe subscribers ofbonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09.The above bond amount isduly confirmed by NNPLC to HMRC, UK onthe requisition of FT & TR.Further, the complete information with respect to raising of bonds were duly filed before Investigation Officer and DIT (Intl) during the course ofassessment and was also disclosed inthe Audited Accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce amount of ₹ 254.75 crores, the assessee stated that this was the unsecured loan obtained from NDTV BV. However, no confirmation was filed nor this office was afforded any verification regarding the creditworthiness of the lender or the genuineness of the transaction. In the absence of these, the assessee has not discharged its onus u/s 68 and there is no alternative but to propose that the amount of ₹ 254.75 crores may be added to the assessee's taxable income for the year under consideration. Further, it is pertinent to mention that although the assessee claimed that "the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09", yet no such details were found in the assessment records, which was specifically confronted to the assessee and yet, the assessee has failed to substantiate its claim." 5.19. The copy of the remand report was given to the assessee on 16.12.2013 to submit its rejoinder and on the day of hearing i.e. on 17.12.2013 they were asked to treat the forwarding letter of the DRP enclosing the remand report as enhancement notice by D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was informed that no such documents were found in the assessment record for AY 2008-09. The assessee vide letter dated 09.12.2013 stated that it was again filing copy of the submission dated 08.02.2012 filed in the course of assessment of AY 2008-09 before AO, which consisted of the complete list of the subscribers to bonds, subscription agreement and other relevant details and documents enclosed as Annexure B. Copies of submissions dated 28.05.2012, 31.05.2012, 11.06.2012 and 20.07.2012 stated to have been filed before the then AO and copies of submissions dated 18.02.2011, 03.03.2011, 08.03.2011, 29.03.2011 and 30.03.2011 stated to have been filed before the Investigation Officer and DIT were also claimed to have been enclosed as Annexure C1-C5. 2.2.3 However, perusal of the documents enclosed by the assessee reveals that in response to requisition to prove the identity of the investors, their creditworthiness and genuineness of the transactions, the assessee has filed merely a list titled "The Initial Investors", listing out 8 entities, many of them from Cayman Islands and furnishing of such list does not discharge the assessee of its onus to prove the identity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into 10 pages) &11.03.2013 (running into 2 pages) marked as Annexure El and Annexure E2 respectively. At the outset, it is submitted that there is no reference to the impugned issue of unsecured loans amounting to ₹ 254.75 crores raised during the year. The contents of the referred letters address certain queries raised by the AO and query regarding unsecured loans is not one of such queries. The bare letters are not even supported by any Annexures mentioned ion the said letters. 2.3.5 Under the circumstances, when the attached annexure- less letters do not contain any reference to query regarding unsecured loans nor attempt to address such query, therefore, filing of such letters does not serve any purpose 2.3.6 It is pertinent to mention that during the course of hearing before the Hon'ble DRPon 23.12.2013, the assessee has filed a reply on the issue. It has been stated by the assesseethat the Impugned unsecured loan has been raised pursuant to Loan Agreement dated 10.11.2008between Universal Studios International BV, NDTV, NNPLC and NDTV Networks BV.Confirmation from Universal Studios International BV is also stated to be attached. However,perusal of the attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are therefore in agreement with the AO's finding that the onus of proving the genuineness of the loan transaction has not been discharged by the assessee. The AO is, therefore, directed to make addition of ₹ 254.75 crores. " 9.6 In view of the above detailed facts and circumstances of the case and in compliance with the directions of the Honble DRP as reproduced above, it is held that the assessee has failed to discharge its onus of proving the genuineness of the transaction of raising unsecured loan through its subsidiary NDTV Networks Pic and hence, the amount of ₹ 254.75 crores representing the amount of such unsecured loan is added to the assessee' taxable income u/s 68 of the Act. 9.7 As I am satisfied that on this issue, the assessee has concealed the particulars of its income within the meaning of section 271(1)(c) of the Act, therefore, penalty proceedings are separately initiated." 121. The ld AR further submitted that copies of the loan agreement are provided wherein the credit facility of US$ 15 million (Rs.254.75 crores) was provided by NDTV Networks BV to NDTV Networks PLc. He submitted that the loan transaction supported by the balance sheet of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an subsidiaries particularly NDTV Imagine through NNPLC. According to him this included a loan of US$ 50 million, which came to NNPLC as a loan from NDTV BV and was in fact was out of subscription money received from NBCU. In view of this statement of the Director of company who was at the helm of the affairs we do not have any option but to set aside this ground of cross objection back to the file of the ld Assessing Officer with a direction to make a proper enquiry with respect to the loan of US$50 million. The ld Assessing Officer is further directed to carry enquiry also with respect to the fact that whether this loan amount was also out of subscription sum received from NBCU and is part of the total consideration of ₹ 642 crore to avoid any duplication of addition in the interest of justice. The assessee is also directed to submit the complete explanation with respect to the above loan with exhaustive evidences before the ld Assessing Officer. Needless to say that ld Assessing Officer after enquiry as deem fit confront the assessee with the result of the enquiry and after seeking the explanation of the assessee deal with the issue in accordance with the law. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 6.1 OF GROUNDS OF APPEAL: DISALLOWANCE OF ₹ 78.40.990/- OF CLAIM OF DEDUCTION U/S 14A OF THE ACT 38.1 The Appellant is a listed company in Bombay Stock Exchange (BSE) / National Stock exchange (NSE). In the course of its business of news broadcasting it had made investments in its subsidiaries in India as well as outside India. In addition to the same, the company had also made investment in share capital of other Indian companies. The details of such companies are reproduced at page 95 of the appeal set wherein the appellant disclosed the year of investment as well as the dividend received during the year. For the sake of ease of reference, the details are reproduced in a tabulated manner below 129. The Id DR submitted that AO has recorded his satisfaction about the assessee's calculation and therefore his conclusion would not be rejected. For this, he relied upon the decision of the Hon'ble Delhi High Court in case of Indiabulls Financial Services Ltd. Vs. DCIT 76 Taxmann.com 268. He further relied upon the decision of Hon'ble Supreme Court in case of Godrej and Boyce Manufacturing Co. Ltd Vs. DCIT 81 Taxmann.com 117. In the end, he submitted that the matter m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom which does not or shall not form part of the total income ₹ 11,52,500/-* Expenditure incurred in relation to exempt income ₹ 78,40,990/- * As computed in draft assessment order and reproduced in para 5 above. 5.2 On this issue, it is observed that no managerial expenses in respect of investment made by the assessee in group companies and other companies have been reflected or disallowed and offered for taxation. The assessee has claimed having incurred Nil expenditure in respect of these investments. It is pertinent to mention here that the assessee company has common infrastructure and common personnel for earning income under various heads, but still, no separate expenditure was booked for earning the exempt income comprised in the mutual funds. Therefore, it is fair and reasonable to conclude that the assessee has earned both exempt as well as taxable income by using common facilities and common manpower. Hence, it cannot be said that no part of expenditure was incurred to receive income under any particular head. In the absence of separate accounts being maintained by the assessee, the expenditure in relation to the income, which does not form part of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of hearing. The assessee is also eligible to raise relevant contention and submit the relevant details to support its claim. In view of this ground No. 11 of the cross objection is allowed accordingly. 132. Ground No. 12, 13 of the appeal are with respect to computation of arms length price with respect to the business support services where the ALP was determined an adjustment of ₹ 7463229/- was made. The contention of the assessee is that price received was ₹ 74687177/- is taken instead of ₹ 75277881/-. The ld AR submitted that assessee has been denied the benefit of working capital benefit while considering the adjustment. He further submitted that the objection were raised before the ld Dispute Resolution Panel, however, same were not considered by the ld DRP. 133. The ld DR fairly agreed that if the assessee is entitled for working capital adjustment then the ld Transfer Pricing Officer may be given an opportunity to examine the claim of the assessee and if same is found in accordance with the law then it may be granted. 134. We have carefully considered the rival contentions. The only claim of the assessee is to grant assessee the adjustment on account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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